Forward Exchange Contract

Home » CMA Glossary Term » Corporate Finance » Forward Exchange Contract

A forward exchange contract is a financial instrument used to hedge against currency risk by locking in an exchange rate for a future date. This contract obligates the buyer and seller to exchange a specified amount of one currency for another at a predetermined rate on a set future date, mitigating the impact of currency fluctuations. Forward exchange contracts are commonly utilized in international trade and finance to ensure cost predictability.

CMA Exam Academy 16-Week Accelerator Program