Contingent Forward Contract In Sacramento
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A contingent contract is a legal agreement in which the terms and conditions only apply or take effect if a specific event occurs. Essentially, the parties involved agree to perform actions or obligations based on the occurrence or non-occurrence of a particular event in the future.
A deal contingent forward is a specialised forward foreign exchange (FX) contract. The hedging customer is only obliged to fulfil the contract if a planned major transaction, such as an acquisition, occurs.
Forward Contracts can broadly be classified as 'Fixed Date Forward Contracts' and 'Option Forward Contracts'. In Fixed Date Forward Contracts, the buying/selling of foreign exchange takes place at a specified future date i.e. a fixed maturity date.
While a forward commitment contains an obligation to carry out the transaction as planned, a contingent claim contains the right to carry out the transaction but not the obligation. As a result, the payoff profiles between these derivatives vary, and that affects how the contracts themselves trade.
A "contingent contract" is a contract to do or not to do something, if some event, collateral to such contract, does or does not happen.
