Forward Markets Quotation Methods Forward foreign exchange contracts are used to hedge against risks in the foreign exchange market. Forward contract is an agreement to exchange one currency for another in a specified future date (could be 30 days or 360 days or even longer) at a predetermined price. Most of the trading in this market is dominated by big banks. There are two quotation methods in forward contract. Outright Rate method is quoted to commercial customers and Swap Rate method which is quoted in the interbank market as a discount or premium. The premium or discount is calculated using the following fomula: = F – S/S * 12/N * 100 (F stands for Future vale, S is spot rate and N is the maturity period)

Sources -Foundation of multinational financial management. The foreign Exchange Market. Alan Shapiro -Global Economic Analysis www.investopedia.com/exam-guide/cfa-level-1/global-economic-analysis/forward-market.asp - - International Economics. The foreign exchange market. Thomas Pugel