The forward market is the informal over-the-counter

financial market A financial market is a market in which people trade financial securities and derivatives at low transaction costs. Some of the securities include stocks and bonds, raw materials and precious metals, which are known in the financial marke ...

by which contracts for future delivery are entered into. It is mainly used for trading in foreign currencies, where the contracts are used to hedge against foreign exchange risk.

Commodities In economics, a commodity is an economic good, usually a resource, that specifically has full or substantial fungibility: that is, the market treats instances of the good as equivalent or nearly so with no regard to who produced them. Th ...

are also traded on forward markets. Examples include agricultural products such as rice, and energy futures, such as oil and

natural gas Natural gas (also fossil gas, methane gas, and gas) is a naturally occurring compound of gaseous hydrocarbons, primarily methane (95%), small amounts of higher alkanes, and traces of carbon dioxide and nitrogen, hydrogen sulfide and helium ...

. Transactions on a forward market are typically not standardized, and contracts are customised to the needs of the trading parties. In contrast, standardized forward contracts are called

futures contract In finance, a futures contract (sometimes called futures) is a standardized legal contract to buy or sell something at a predetermined price for delivery at a specified time in the future, between parties not yet known to each other. The item tr ...

s and traded on a

futures exchange A futures exchange or futures market is a central financial exchange where people can trade standardized futures contracts defined by the exchange. Futures contracts are derivatives contracts to buy or sell specific quantities of a commodity or ...

References

{{DEFAULTSORT:Forward Market Financial markets

See also

References