Deliverable Forward
A forward contract that results in the physical delivery of currencies on the settlement date, with both parties exchanging the actual currencies as agreed.
Related terms
Forward Contract
An agreement to exchange a set amount of one currency for another at a fixed rate on a future date. It locks in today’s rate, protecting a business from adverse currency moves before a payment falls due.
Read full definitionNDF (Non-Deliverable Forward)
A forward contract settled in cash rather than by physical currency delivery. NDFs are commonly used for currencies with trading restrictions or capital controls.
Read full definitionDeliverable FX
A type of foreign exchange transaction where the underlying currencies are physically exchanged following a contract. Common in international trade and investment transactions.
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Hedging
Taking an offsetting position to reduce the impact of currency or price movements on a business. The aim is to protect margins and make cash flows more predictable, not to speculate.
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The amount added to or subtracted from the spot rate to price a forward contract. They reflect the interest-rate difference between the two currencies over the contract period.
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A hedging strategy that combines buying a protective option and selling another to offset the cost. It caps downside risk within a defined range while keeping some upside, often at little or no premium.
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Reducing currency risk by matching revenues and costs in the same currency, so gains and losses offset without a financial instrument, for example, paying suppliers in the currency you also earn.
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The degree to which a business’s financial results are affected by exchange-rate movements. It arises from foreign-currency sales, purchases, assets, liabilities or forecast cash flows.
Read full definitionMark-to-Market
Revaluing an open position at the current market rate to show its present gain or loss. Hedges are marked to market so a business can see the live value of its contracts.
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