A forward contract which allows the holder to lock in today an exchange rate at a future date. With this contract, the two counterparties agree to exchange specific amounts of currency in the future based on a forward exchange rate as agreed at the time of trade.

The seller (the short) is committed to delivering a given currency, whereas the buyer (the long) is committed to take delivery of that currency at the specified forward price. At maturity, the two counterparties fulfill the exchange and unwind their positions.