Financial forward contracts (ForwardContracts), also known as forward contracts, refer to a contract in which both parties agree to buy or sell a certain amount of a certain financial asset at a certain price at a certain time in the future.

Forward contract is the simplest kind of financial derivative instrument and a non-standardized agreement. It is mainly traded in the over-the-counter market and depends on the quantity, quality, delivery time, delivery location, etc. of the underlying asset. Transaction conditions shall be agreed upon by both parties to the transaction.

Forward agreements are the basis for futures, options and swaps, the latter of which are financial derivatives developed on the basis of forward agreements.

The financial forward market refers to the market engaged in financial forward transactions.

Forward agreements mainly include forward currency agreements and forward interest rate agreements.

Forward currency agreement, also known as forward foreign exchange contract, means that when the contract is established on the day of the foreign exchange purchase and sale transaction, the parties to the transaction do not need to receive or pay the corresponding currency, but agree on an exchange rate stipulated in the agreement at a certain time in the future ( That is, the forward exchange rate) for currency delivery and settlement.

A forward interest rate agreement is a forward contract on interest rates. The two parties agree to pay the difference between the agreed interest rate and the market interest rate at a specific time in the future.

That is, both parties to the transaction will pay the discount amount of the difference between the agreed interest rate and the reference interest rate on the future settlement date according to the specified period and principal amount.

Generally speaking, the buyer of a forward interest rate agreement pays the agreed interest rate in order to prevent the risk of rising interest rates; the buyer of a forward interest rate agreement pays the market interest rate in order to prevent the risk of falling interest rates. .