Forward
Short definition
A forward is a commitment to buy or sell at a set rate or price on a future date. It is OTC, tailored on tenor and amount. It starts at zero value; at maturity the gap to spot becomes cash.
Detailed explanation
An FX forward is priced near interest parity; the gap between policy and market rates is carry, not a “cheap/expensive” FX view. An NDS settles the difference without exchanging principal.
Counterparty and CSA margin create credit risk. Fair-value moves hit P&L; without hedge accounting that noise is mistaken for operating profit.
Why it matters for the CFO
Locking the rate on imports, FX debt service and tendered sales protects budget DSCR. A forward also cuts upside.
How it is calculated
Forward ≈ Spot × (1 + r_fiyat) / (1 + r_baz) (faiz paritesi, yaklaşık)
Interest parity prices carry; liquidity, credit and expected-spot gaps add a margin. The formula is not a universal fair price.
Variables in the formula
- Spot: spot rate
- r: interest rate of each currency (matching day-count)
How to read it
The forward rate is not a forecast; it is carry. Whether spot is “fair” is a separate REER/PPP debate.
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What to learn next
Definitions are educational. They are not investment, credit or tax advice.