A forward contract is an agreement to buy or sell a particular asset on an agreed-upon date in the future at a price determined at the time the contract is entered into. Our forward contracts help our customers to manage the risks they may face if, say, currency exchange rates rise or fall contrary to their expectations.
Besides offering protection, forward contracts are also binding upon both parties because the underlying transaction (sale/purchase) is irrevocable. That is, the transaction must take place on the agreed-upon date no matter what the market price may be at the time.
Forward contracts are frequently used as a way of managing exchange rate risk. As such, they are an effective derivative instrument (a contract that derives its value from the performance of an underlying asset) for firms that are active in foreign trade and/or don’t want to carry exchange rate risk on their balance sheets. Such contracts do entail price risk however.
For detailed information about the tax consequences of forwards trading in Turkey please click here.