Tuesday, January 7, 2020

Methods of Capital Allowance Free Essay Example, 3000 words

A Forward Contract is a way for a buyer or a seller to lock in a purchasing or selling price for an asset, with the transaction set to occur in the future. In essence, it is a financial contract obligating the buyer to buy, and the seller to sell a given asset at a predetermined price and date in the future. Forwards are contracts that are traded in a forward market. The forward market is the place where the buying and selling of a particular currency are done at a fixed future date for a predetermined date i. e. the forward rate of exchange. Forward contracts are basically a way of mitigating and hedging risk like other derivative instruments. The forward cover is the most frequently employed hedging technique. The only issue with forwarding contracts is that they are usually not available for unpopular currencies. Forward contracts are Over the Counter contracts; hence they can be matched exactly to the future sums involved. There is no transfer of cash or any asset until the time of maturity or expiry of that particular contract. We will write a custom essay sample on Methods of Capital Allowance or any topic specifically for you Only $17.96 $11.86/page

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