The Country Farm and the Cookie Maker met today and agreed to exchange wheat six months from now at a price which they negotiate
d today. This agreement was made between the two firms and did not pass through an organized exchange. Which one of the following best describes this transaction?
forward contract is a non-standardized contract between two individuals (the buyer and seller) who agree to buy and sell a good on a future date at a specific price. Unlike the future contract, forward contract is not standardized and parties can easily breach agreements made because it is traded over the counter thus the risk is high.
