A bilateral OVERTHECOUNTER DERIVATIVE that permits the purchaser to buy, and the seller to sell, a reference ASSET at a predetermined future price and future date. Unlike a SWAP, a forward contract features no intervening cash FLOWS, simply a final cash exchange at the conclusion of the contract. Forwards are highly customizable; the two parties can negotiate terms regarding amount, SETTLEMENT, maturity, and UNDERLYING reference. (See diagram on opposite page.) See also DISCOUNT, FORWARD, PREMIUM, PRICE, RATE, RATE AGREEMENT, NONDELIVERABLE FORWARD.
Black’s Law Online Dictionary
