FORWARD MARKET Meaning and
Definition
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The forward market refers to a financial market where contracts are traded for the future delivery of a specific asset, such as commodities, currencies, or securities, at a predetermined price and date. It is a type of derivative market that allows participants to hedge against or speculate on the future movements in the prices of these assets.
In a forward market, the contract terms are negotiated and agreed upon by the buyer and the seller, without the involvement of an organized exchange. The agreed-upon price, known as the forward price, is typically different from the spot price, reflecting factors such as interest rates, carrying costs, and expected future supply and demand conditions.
Participants in the forward market include hedgers, who aim to protect themselves against future price fluctuations; speculators, who aim to profit from price movements; and arbitrageurs, who aim to exploit any price discrepancies between the forward and spot markets.
While the forward market provides participants with flexibility and customization in terms of contract terms and settlement dates, it also exposes them to counterparty risk, as there is no centralized clearinghouse to guarantee the performance of the contracts. As a result, participants need to carefully assess the creditworthiness of their counterparties and monitor their exposure to potential losses.
Common Misspellings for FORWARD MARKET
- dorward market
- corward market
- vorward market
- gorward market
- torward market
- rorward market
- firward market
- fkrward market
- flrward market
- fprward market
- f0rward market
- f9rward market
- foeward market
- fodward market
- fofward market
- fotward market
- fo5ward market
- fo4ward market
- forqard market
- foraard market
Etymology of FORWARD MARKET
The word "forward market" is derived from the combination of the terms "forward" and "market".
- "Forward" originated from the Old English word "foreweard", which means "toward the front" or "in advance". Over time, it evolved to describe something that is positioned ahead or progressing in a specific direction.
- "Market" comes from the Latin word "mercatus", meaning "trade" or "business activity". It refers to a physical or virtual place where goods, services, or securities are bought, sold, or exchanged.
Therefore, "forward market" refers to a specific type of market where goods, services, or financial instruments are traded for future delivery or settlement at a pre-agreed price.
Similar spelling words for FORWARD MARKET
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