A forward contract or a strip of forward contracts that has accrual features whereby a holder (investor) can have a better underlying rate or price. The notional (notional principal) is not a fixed amount, but rather an amount that builds up (accrues) over time. Such a product is subject to a fixing schedule and the rate of accrual is determined based on where the underlying rate/ price fixes compared to specific accrual barriers.

The embedded accrual barrier can be either European or American. A European barrier entails that if the spot price/ rate trades through the barrier, accrual mechanism ceases to work, while the holder retains what has accrued retained, and if, later on, the spot goes back inside the barrier, accrual mechanism re-activates.

An American barrier entails that if the spot happens to trade through the barrier, accrual mechanism comes to a halt, while all what has accrued prior to that point is retained.