A customized agreement between two parties to buy or sell an asset at a specified price on a future date. Unlike standardized futures contracts, forwards are privately negotiated and carry counterparty risk since they trade over-the-counter.
From Old English 'foreweard' meaning 'toward the future' and Latin 'contractus' meaning 'drawn together.' Forward contracts are among the oldest derivatives, used by medieval merchants to lock in grain prices before harvest, evolving into modern financial instruments in the 20th century.
Forward contracts are like making a handshake deal to buy your friend's car six months from now at today's agreed price - no matter what happens to car prices in between! The catch is that unlike futures contracts, there's no exchange guaranteeing the deal, so you're trusting your friend to actually show up with the car.
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