Long Dated Forward

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DEFINITION of 'Long Dated Forward'

A type of forward contract commonly used in foreign currency transactions. Long dated forward refers to contracts that typically involve positions that have settlement dates longer than a year away. Long dated forward contracts are sometimes used by companies to hedge certain currency exposures.

INVESTOPEDIA EXPLAINS 'Long Dated Forward'

Long dated forward contracts can be risky instruments. The holder of these contracts assumes the risk that a counterparty may not hold up their end of the contract. Also, long dated forward contracts on currencies often have larger bid-ask spreads than shorter-term contracts, making their use somewhat expensive.

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  2. How valuable is the forward rate as an overall economic indicator?

    Any given forward rate is theoretically equal to its corresponding spot rate plus future expectations. Many investors and ... Read Full Answer >>
  3. How do I convert a spot rate to a forward rate?

    Think of the relationship between spot and forward rates in the same way as the relationship between discounted present value ... Read Full Answer >>
  4. How accurate is the forward rate in predicting interest rates?

    Forward rates are extremely limited predictors of actual interest rates. This isn't particularly surprising, given the multitude ... Read Full Answer >>
  5. What is the difference between a forward rate and a spot rate?

    The forward rate and spot rate are different prices, or quotes, for different contracts. The forward rate is the settlement ... Read Full Answer >>
  6. Why is the initial value of a forward contract set to zero?

    Forward contracts are buy/sell agreements that specify the exchange of a specific asset and on a specific future date but ... Read Full Answer >>
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