A forward contract is a configurable derivative contract between two parties to buy or sell an asset at a specified price in the future.
Forward contracts can be tailored to specific product, quantity and delivery date.
Forward contracts are not traded on a centralized exchange and are considered over the counter (OTC) instruments.
For example, forward contracts can help producers and consumers of agricultural products to hedge against changes in the price of an underlying asset or commodity.
Financial institutions initiating forward contracts are exposed to a greater degree of settlement and default risk than contracts that are regularly marked to market.
Asset-Backed Securities (ABS) are financial securities backed by income-producing assets such as credit card receivables, home equity loans, student loans, and auto loans.
Forward interest rate agreements (FRAs) are over-the-counter contracts between parties that specify an interest rate to be paid on an agreed date in the future.
A holding company depositary receipt (HOLDR) was a diversified investment product offered by Merrill Lynch that gave investors access to multiple shares in a particular industry or sector through a single holding.
Interest rate swaps are forward contracts in which one stream of future interest payments is exchanged for another based on a specified principal amount.
Risk acceptance or risk containment is a conscious strategy of recognizing the possibility of small or rare risks without taking measures to hedge, hedge or avoid these risks.
Arbitrageurs are investors who exploit market inefficiencies of any kind. They are necessary to ensure that inefficiencies between markets are smoothed out or kept to a minimum.
Audit risk is the risk that the financial statements will be materially incorrect, even if the auditor’s report indicates that the financial statements do not contain any material misstatement.
A beneficial owner is a person who enjoys the benefits of ownership, despite the fact that the ownership of the property is registered in a different name.