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What is Forward Contract?

Definition of Forward Contract

A Forward Contract is a type of derivatives trading, as it is a contract between two parties to buy or sell an asset at a specified price at a future date is significantly customisable because forward contracts are non-standardized to a large extent. A forward contract's non-standardized nature makes it particularly efficient for hedging and other similar forms of investment. However, the fact that they are not traded on a centralized exchange results in a higher degree of default risk as there are no safeguards against either party breaching their contractual obligation; this means that forward contracts are not as easily available to the retail investors as futures contracts.
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