Modeling Forward Contracts
I hope that posterity will judge me kindly, not only as to the things which I have explained, but also to those which I have intentionally omitted so as to leave to others the pleasure of discovery.
—René Descartes, La Géométrie
This chapter examines the specifics, mechanics, and terminology of a vastly popular contract type in the over-the-counter (OTC) market: the forward contract (or simply forward). The opening section defines a forward contract and describes its associated business rules.
Defining a Forward Contract
A forward contract is an agreement between two parties to buy or sell an asset for a certain price ...
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