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In finance, a non-deliverable forward (NDF) is an outright forward or futures contract in which counterparties settle the difference between the contracted NDF price or rate and the prevailing spot price or rate on an agreed notional amount. It is used in various markets such as foreign exchange and commodities.
For a trade with time to expiry of z years, the expiry date is found by first calculating the spot date, then moving forward z years from the spot date to the delivery date. If the delivery date is a non-business day or a US holiday, move forward until an acceptable delivery date is found.
Forward contracts are very similar to futures contracts, except they are not exchange-traded, or defined on standardized assets. [7] Forwards also typically have no interim partial settlements or "true-ups" in margin requirements like futures, that is the parties do not exchange additional property securing the party at gain and the entire ...
However, most non-US brokers only use the term "initial margin" and "variation margin". The Initial Margin requirement is established by the Futures exchange, in contrast to other securities' Initial Margin (which is set by the Federal Reserve in the U.S. Markets). A futures account is marked to market daily.
Non-deliverable Cross-Currency Swap (NDXCS or NDS): similar to a regular XCS, except that payments in one of the currencies are settled in another currency using the prevailing FX spot rate. NDS are usually used in emerging markets where the currency is illiquid, subject to exchange restrictions, or even non-convertible. This associates with ...
A currency future, also known as an FX future or a foreign exchange future, is a futures contract to exchange one currency for another at a specified date in the future at a price (exchange rate) that is fixed on the purchase date; see Foreign exchange derivative.
A foreign exchange swap has two legs - a spot transaction and a forward transaction - that are executed simultaneously for the same quantity, and therefore offset each other. Forward foreign exchange transactions occur if both companies have a currency the other needs. It prevents negative foreign exchange risk for either party. [3]
The forward exchange rate is the rate at which a commercial bank is willing to commit to exchange one currency for another at some specified future date. [1] The forward exchange rate is a type of forward price. It is the exchange rate negotiated today between a bank and a client upon entering into a forward contract agreeing to buy or sell ...