Forward contract in the narrower sense

Contract entered into off-market (meaning: not dealt on a recognized exchange) by two parties who – according to individually negotiated conditions – agree on the purchase/sale of an – in terms of quantity and quality precisely determined – underlying asset at a fixed later date. – Unlike an option, however, the buyer in such a forward transaction has not the right but the obligation to deliver or take delivery of the contractually agreed quantity of an underlying asset on the specified date. In most cases, however, the underlying is not physically delivered, but the contractual obligation is settled by a corresponding counter-position. – The difference to futures contracts – often just called contracts; unfortunately, the terminology is not uniform – is that futures exchanges standardize the contract terms for all contracts in order to make them marketable. – See futures, option, spot market, futures exchange.

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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