Outright Forward

AAA

DEFINITION of 'Outright Forward'

A forward currency contract with a locked-in exchange rate and delivery date. An outright forward contract allows an investor to buy or sell a currency on a specific date or within a range of dates. Foreign exchange forward contracts function in a very similar fashion to standard forward contracts.

INVESTOPEDIA EXPLAINS 'Outright Forward'

Companies that make large purchases from foreign business can use outright forward contracts to cover costs. For example, a French company that buys materials from a Chinese supplier may be required to provide payment for half of the total value of the payment now and the other half in six months. The first payment can be covered with a spot trade, but in order to reduce currency risk exposure, the French company locks in the exchange rate with an outright forward. If the company still requires the currency in six months, it can purchase it at the agreed-upon rate.

RELATED TERMS
  1. Exchange Rate

    The price of a nation’s currency in terms of another currency. ...
  2. Forward Contract

    A customized contract between two parties to buy or sell an asset ...
  3. Currency Forward

    A binding contract in the foreign exchange market that locks ...
  4. Currency Futures

    A transferable futures contract that specifies the price at which ...
  5. Forex - FX

    The market in which currencies are traded. The forex market is ...
  6. ISDA Master Agreement

    A standard agreement used in over-the-counter derivatives transactions.
Related Articles
  1. Solutions For Concentrated Positions
    Investing Basics

    Solutions For Concentrated Positions

  2. A Primer On The Forex Market
    Options & Futures

    A Primer On The Forex Market

  3. Getting Started In Foreign Exchange ...
    Forex Education

    Getting Started In Foreign Exchange ...

  4. An Introduction To Swaps
    Options & Futures

    An Introduction To Swaps

Hot Definitions
  1. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  2. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  3. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  4. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  5. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
  6. Parity Price

    When the price of an asset is directly linked to another price. Examples of parity price are: 1. Convertibles - the price ...
Trading Center