Outright Forward

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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.

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