A trader has just agreed to exchange British pounds for French francs three months from today. this exchange is an example of a forward trade
A forward contract, or simply a forward, is a non-standardized contract between two parties to buy or sell an asset at a specified future time at a price agreed upon at the time the contract is signed, classifying it as a derivative instrument.
Forward contracts are traded over-the-counter (OTC), which means they are not traded on an exchange. When a forward contract matures, it is settled in one of two ways. The first method is referred to as "physical delivery."
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