Forward Contract

A customized private agreement between two parties to buy or sell a currency at a specified rate on a future date.

Detailed Definition

In corporate forex hedging, importers and exporters use forward contracts with banks to lock in exchange rates months in advance, safeguarding profit margins against volatile currency depreciation.

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A weighted average of a country's currency relative to an index of other major currencies, adjusted for inflation.

Spread

The difference between the buying price (bid) and the selling price (ask) of a currency or asset.