Explanation of the forward market

Posted on 2023-04-25

The forward market is a financial market in which participants buy and sell contracts for the delivery of a specific asset or currency at a future date, at a price agreed upon today. Unlike the spot market, where assets are exchanged immediately, the forward market involves contracts that are settled on a specified date in the future. The price of the asset in the forward market is determined by the current spot price, adjusted for the cost of carry and other factors such as interest rates, dividends, and storage costs. The forward market is commonly used by businesses and investors to hedge against adverse movements in asset prices or currency exchange rates.

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