Definition of Forward market:
Market dealing in commodities, currencies, and securities for future (forward) delivery at prices agreed-upon today (date of making the contract). In commodity and currency markets, forward trading is used as a means of hedging against sharp fluctuations in their prices. See also futures market.
A forward market is an over-the-counter marketplace that sets the price of a financial instrument or asset for future delivery. Forward markets are used for trading a range of instruments, but the term is primarily used with reference to the foreign exchange market. It can also apply to markets for securities and interest rates as well as commodities.
A forward market leads to the creation of forward contracts. While forward contracts—like futures contracts—may be used for both hedging and speculation, there are some notable differences between the two. Forward contracts can be customized to fit a customer's requirements, while futures contracts have standardized features in terms of their contract size and maturity.
How to use Forward market in a sentence?
- Forward contracts differ from future contracts in that they are customizable in terms of size and length, or maturity term.
- Forward contract pricing is based on interest rate discrepancies.
- The most commonly traded currencies in the forward market are the same as on the spot market: EUR/USD, USD/JPY and GBP/USD.
Meaning of Forward market & Forward market Definition