Forward Market
The forward market is a marketplace where forward contracts are traded. A forward contract is a private, over-the-counter (OTC) agreement between two parties to buy or sell an asset at a specified price on a future date. Unlike futures contracts, forward contracts are unregulated and customizable, meaning the contract terms, including the lot size, expiration date, and underlying asset, can be tailored to the needs of the parties involved. This flexibility makes forward contracts attractive to large financial players, such as banks and hedgers. However, this lack of regulation also introduces risks, particularly related to credit exposure.
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