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.

BREAKING DOWN '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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RELATED FAQS
  1. How does a forward contract differ from a call option?

    Forward contracts and call options are different financial instruments that allow two parties to purchase or sell assets ... Read Full Answer >>
  2. Over what time period should I be looking at the forward rate?

    Your target time horizon for forward rates depend on your own investment horizon. If you have a specific forward contract, ... Read Full Answer >>
  3. What kinds of derivatives are types of forward commitments?

    A derivative is a type of security in which the price of the security is dependent on underlying assets. A derivative could ... Read Full Answer >>
  4. How do I calculate a forward rate in Excel?

    You need to have the zero-coupon yield curve information to calculate forward rates, even in Microsoft Excel. Once the spot ... Read Full Answer >>
  5. 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 >>
  6. 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 >>

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