Forward Hedge

A forward hedge is a hedge transacted in the forward market for foreign currencies. A forward contract is a private agreement between two parties to enter into a transaction at some future date and at a price agreed to at the time the agreement is made. In terms of foreign currencies, a forward hedge entitles a firm to either purchase or sell units of an individual foreign currency for a negotiated price at a future time. Outside the foreign currencies market, the instrument is normally called a forward, without the word hedge. See also futures hedge and options hedge and money market hedge.