Forward Contracts
Forward contracts are a great hedging tool for your company. This contract allows the customer to lock in a rate today and settle it in the future at an open or closed date. The rate is determined by how long the contract is for, the current spot rate and the current interest rate differential between the two countries. Companies can set the length of the contract between 1 week and 1 year depending on the time frame required. Many companies choose to lock in forward contracts to manage foreign exchange risk in the future.