The price specified in a forward contract for a specific commodity. The forward price makes the forward contract have no value when the contract is written. However, if the value of the underlying commodity changes, the value of the forward contract becomes positive or negative, depending on the position held. Forwards are priced in a manner similar to futures. As with a futures contract, the first step in pricing a forward is to add the spot price to the cost of carry (interest forgone, convenience yield, storage costs and interest/dividend received on the underlying). However, unlike a futures contract, the price may also include a premium for counterparty credit risk, and there is not daily marking-to-market to minimize default risk. If there is no allowance for these credit risks, then the forward price will equal the futures price.
Related information about forward price:
- Forward price - Wikipedia, the free encyclopedia
The forward price (or sometimes forward rate) is the agreed upon price of an asset in a forward contract. Using the rational pricing assumption, for a forward ...
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The forward price of such a contract is commonly contrasted with the spot price, which is the price at which the asset changes hands on the spot date.
- Forward Price Definition | Investopedia
The predetermined delivery price for an underlying commodity, currency or financial asset decided upon by the long (the buyer) and the short (the seller) to be ...
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Definition of forward price: The price specified in a forward contract for a specific commodity. The forward price makes the forward contract have no value when ...
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The agreed upon price of the underlying asset in a forward contract. When a forward contract is made, the parties agree to buy/sell the underlying at a certain ...
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period-0 forward price F0 we get. F0 = S0e. (r−益)T . • Can also just specify the ( net) opportunity cost rate as r − ¯q. Denis Pelletier, North Carolina State ...
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The forward price is the agreed price of an asset in a forward contract. The price is paid at maturity — that is, the time at which the asset changes hands — and ...
- Determining Forward Prices and Futures Prices
In a well functioning market, the forward price of carry-type commodities (stocks & stock indexes, debt securities, currencies, & gold) must preclude the possibility ...