Forward sale

Forward sale

A method for hedging price risk that involves an agreement between a lender and an investor to sell particular kinds of loans at a specified price and future time.

Forward Sale

1. The sale of a future loan in which the lender (seller) guarantees an investor a certain payment flow and interest rate. This is usually done to hedge against the investor's future foreign exchange risk and interest rate risk.

2. In Islamic banking, the purchase of and payment for a specified good or service at a price usually lower than market value, with delivery deferred until a set future date. A bank buys a commodity before it is grown or manufactured, then may re-sell it to a third party in order to turn a profit on the transaction. This is used as a form of financing for farms and businesses, and is governed by a salam contract.