Hedging with Forwards

A forward is a contract between the client and TFI Markets that locks in the exchange rate for the exchange of two currencies on a future date.

The forward contract can be tailored to reflect the exact amount of exposure and value date required by the client.

The client will initially deposit a margin with TFI Markets and at the value date the forward is closed-out and the client can either effect a payment or just settle the profit or loss from the contract.

Another variant of the forward contract that can be used as a hedging tool and is used primarily for covering exposure in illiquid or exotic currencies is the Non Deliverable Forward which works in the same way as a forward contract but at the value date instead of exchanging cash flows the two parties settle the Profit or Loss from the contract.