A forward
currency contract is an agreement by two parties to transact in
currencies at a
specific rate on a future
date and then cash settle the agreement with a simple exchange of the market value difference between the current market rate and the initial agreed - upon rate.
A forward involves an obligation to purchase or sell a
specific currency at a future
date, which may be any fixed number of days from the
date of the contract agreed upon by the parties,
at a price set
at the time of the contract.