Forward Contract - Foreign Exchange Exposure Chapter

AFM

In Forward contracts (incase of Imports), buyers are obliged to excute contract on maturity date. [Only in Options, the buyer has option to cancel the contract] Then, how come buyer can cancel the forward contract before maturity? ( Topic covered under Fates of Forward Contract heading)

Aswath Natarajan

CA Final

★ 2K+

06-Feb-23 01:18

744

Answers (2)

The buyer can take reverse position to cancel our the contract. Say you have a forward buy position. You can sell another forward at a later date. So both legs would knock off one another. Equivalent to cancellation.

CA Suraj Lakhotia

Admin

06-Feb-23 09:36

CA Suraj Lakhotia Admin

Understood.. Thank you!

Thread Starter

Aswath Natarajan

CA Final

★ 2K+

07-Feb-23 06:02