FX Forward

The forward foreign exchange contract allows you to "lock in" an exchange rate for a specific currency amount on a specified date in the future. You are committing to deliver a pre-agreed and fixed amount of one currency for another on a specified date in the future.

Features
A range of maturity dates can be chosen, usually out to 2 years.

Advantages
No premium payable
Allows you to hedge exposure to a currency at a pre-agreed rate
Establishes a known Budget Rate

Disadvantages
Loss of opportunity gains resulting from favorable currency moves
Liability from both parties to exchange cash flows