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When first established, a forward contract is neither an asset nor a liability. It is simply an agreement. Neither party pays anything to the other. This means that its value at the onset is zero.
It is an off-balance sheet transaction as it is just an agreement between two parties.
Equity forwards are customized contracts between two counterparties who agree to buy or sell a stock at a specified price on a future date. The future date is the expiry date of the equity forward contract.
A forward contract is a customized contract between two parties to buy or sell an asset at a specified price on a future date. A forward contract can be used for hedging or speculation, although its non-standardized nature makes it particularly apt for hedging.
A forward contract is a type of derivative. A derivative is an investment contract between two or more parties whose value is tied to an underlying asset or set of assets. For example, commodities, foreign currencies, market indexes and individual stocks can all be underlying assets for derivatives.
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