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Forward Contracts, Rates, and FX Hedges

Forward exchange contract, forward-rate agreement, forward-forward rate, and forward-margin terms.

Forward Contracts, Rates, and FX Hedges is the financial-instruments landing page for futures contracts, forward contracts, index futures, rate futures, currency futures, commodity futures, delivery, carry, contango, roll yield, and forward pricing. It keeps related terms in one branch so readers can move from a broad instrument question to the article that owns the contract evidence.

Use this page when a futures or forward contract changes future delivery, settlement, hedge exposure, or pricing basis. Use the parent Futures, Forwards, and Contracts page when you need the broader instrument map. For an individual decision, confirm the contract, term sheet, prospectus, confirmation, exchange specification, or disclosure record before relying on the term.

Use the table below to move from this landing page into the term page that best matches the instrument evidence.

Key Terms in This Branch

TermUse it for
Forward ContractForward Contract connects future settlement, delivery, carry, margin, or forward-pricing mechanics to exposure management.
Forward Exchange Contract (FEC)Forward Exchange Contract (FEC) connects future settlement, delivery, carry, margin, or forward-pricing mechanics to exposure management.
Forward Exchange RateForward Exchange Rate connects future settlement, delivery, carry, margin, or forward-pricing mechanics to exposure management.
Forward Forward RateForward Forward Rate connects future settlement, delivery, carry, margin, or forward-pricing mechanics to exposure management.
Forward MarginForward Margin connects future settlement, delivery, carry, margin, or forward-pricing mechanics to exposure management.
Forward PremiumForward Premium connects future settlement, delivery, carry, margin, or forward-pricing mechanics to exposure management.
Forward-Rate Agreement (FRA)Forward-Rate Agreement (FRA) connects future settlement, delivery, carry, margin, or forward-pricing mechanics to exposure management.
Variable Prepaid Forward ContractVariable Prepaid Forward Contract connects future settlement, delivery, carry, margin, or forward-pricing mechanics to exposure management.

Example in Use

A business expecting to buy a commodity can use a long futures position to reduce the risk of a future price increase.

What to Check

  • Underlying asset, contract size, expiration, delivery or cash-settlement terms, margin, and exchange or OTC venue.
  • Spot price, forward price, carry cost, funding rate, income yield, storage cost, and basis.
  • Hedging objective, roll schedule, delivery risk, liquidity, and counterparty or clearing exposure.
  • Effect on price risk, cash-flow timing, leverage, margin calls, and portfolio or business exposure.

Common Mistakes

  • Treating futures and forwards as identical despite standardization, clearing, and margin differences.
  • Ignoring roll yield, delivery terms, and basis risk when using futures exposure.
  • Using leveraged derivatives without understanding margin calls and loss potential.

Forward Contracts content is educational and does not provide personalized investment, tax, legal, accounting, valuation, derivatives, or securities advice.

In this section

Choose a subsection first. Deeper term pages live inside each subsection, which keeps large topic hubs readable.

Forward Contract

A forward contract is a customized OTC agreement to buy or sell an asset, rate, or currency at a set future date and price.

Forward Exchange Rate

A forward exchange rate is the agreed rate for exchanging currencies on a future settlement date.

Forward Forward Rate

Forward Forward Rate is a financial instrument term used in contract analysis, payoff profiles, pricing, income claims, or risk transfer.

Forward Margin

Forward Margin, also referred to as Forward Points, represents the difference between the spot rate and the forward rate in foreign exchange trading.

Forward Premium

A forward premium occurs when a currency's forward exchange rate is higher than its spot rate.

Forward-Rate Agreement (FRA)

A forward-rate agreement is an OTC contract that locks in an interest rate for a future borrowing or lending period.

Variable Prepaid Forward Contract

A variable prepaid forward contract lets a shareholder receive cash upfront while agreeing to deliver shares or cash later based on stock performance.

Revised on Sunday, June 21, 2026