Forward commitment

A derivative obliging both parties to transact on terms agreed today — forwards, futures and swaps. Neither side can walk away, which is what separates it from an option.

Where you will meet it

Forward commitment appears in 2 learning outcomes on the CFA syllabus. A few of them:

• Explain what forwards, futures and swaps are
  CFA Level I · Derivatives

  “Forward commitments oblige both parties to transact at terms agreed today.”

• Work out what a forward contract is worth before it matures
  CFA Level I · Derivatives

  “This is the central distinction between price and value in forward commitments: the contracted price is fixed for the life of the deal, while the value floats as the market reprices the same delivery date.”

Practise it

• Today's practice question One question, with every wrong option explained.
• Free Level I diagnostic test Twelve questions that show which topics to start with.
• Free finance calculators Check your arithmetic on the exam's core formulas.

All terms beginning with F · Glossary