Assuming the 30-day forward exchange rate was $1 = 130 and the spot exchange rate was $1 = ×120, the dollar is selling at a premium on the 30-day forward market.
An over-the-counter market known as a forward market determines the price of a financial instrument or asset for future delivery. Although a variety of assets can be traded on forward markets, the phrase is most frequently used to refer to the foreign currency market.
Minimizing risk and fixing the price of an asset or financial instrument for the future is one of the forward market's primary goals. Any party can enter into a contract through the forward market when they want to reduce risk and fix the price of any asset or financial instrument.
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