The forward price is the contract price of the underlying asset under the terms of the forward contract, and is the price that makes the values of the long and short positions zero at contract initiation. It is not the amount it costs to purchase the forward contract. The forward price is expressed in terms of the underlying asset, and may be a dollar value, exchange rate, or interest rate. The value of a forward contract comes from the difference between the forward contract price and the market price for the underlying asset. These values are likely to be different at contract termination, which will result in a profit for either the long or the short position. |
