12th November 2019

standardbank
7

What is forward cover in foreign exchange?

A forward exchange contract, commonly known as a FEC or forward cover, is a contract between a bank and its customer, whereby a rate of exchange is fixed immediately, for the buying and selling of one currency for another, for delivery at an agreed future date.

Likewise, people ask, what are spots and forwards?

In the foreign exchange market, spot is normally two banking days forward for the currency pair traded. A transaction which has settlement after the spot date is called a forward or a forward contract. Other settlement dates are also possible. Standard settlement dates are calculated from the spot date.

Is a forward FX a derivative?

In international finance, derivative instruments imply contracts based on which you can purchase or sell currency at a future date. The three major types of foreign exchange (FX) derivatives: forward contracts, futures contracts, and options.

What is the forward exchange rate?

The forward exchange rate (also referred to as forward rate or forward price) is the exchange rate at which a bank agrees to exchange one currency for another at a future date when it enters into a forward contract with an investor.
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