Definition of 'Forward Contract'
The contract is to buy or sell an asset at a specified future time at a price agreed today. Contrast this to a spot contract which is an agreement to buy or sell an asset today.
The party agreeing to buy the underlying asset in the future assumes a long position, and the party agreeing to sell the asset in the future assumes a short position. The price agreed upon is called the delivery price, which is equal to the forward price at the time the contract is entered into.
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