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Extending a Forward Contract

In: The Exporter’s & Importer’s Handbook on Foreign Currencies

Author

Listed:
  • A. D. P. Edwards

Abstract

One of the great bogys in most people’s minds about selling currency forward is what happens if, having undertaken to deliver the currency in say about three months time, you cannot deliver it because the buyer is late in paying. This does not necessarily present a problem. You nevertheless have to meet your commitment to deliver the currency and as you are not going to receive the currency from the overseas buyer you have to go into the open market and buy it at the spot rate in order to close out your contract with the bank. This may cost you money or you may make money depending on what the spot rate has done in relation to your original conversion rate and forward rate.

Suggested Citation

  • A. D. P. Edwards, 1990. "Extending a Forward Contract," Palgrave Macmillan Books, in: The Exporter’s & Importer’s Handbook on Foreign Currencies, chapter 9, pages 48-52, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-11852-6_10
    DOI: 10.1007/978-1-349-11852-6_10
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