A forward contract or zero-cost range forward contract that is primarily used to cover maturities greater than 30 days with the same forward contract or zero-cost range forward. This type of contract allows an investor to perform currency conversions at the spot rate throughout the contractual period, while the other party calculates the average forward rate for the same period. Then, a cash settlement is made from one party to the other based on the difference between the average rate and the rate negotiated on the forward contract for the amount covered thereby. The settlement has the effect of offsetting the spot rate obtained during the period.
August 10, 2024
