Forward contracts are private agreements between two parties in the OTC markets to buy a currency at a specified future date and price. Essentially, a futures contract is an agreement between two parties to trade currencies at a set price and date in the future.

Forwards and futures markets do not trade actual currencies, unlike the spot market. They deal instead in contracts that represent claims on a specific currency type, a specific unit price, and a future settlement date.

Forwards and futures markets are an integral part of the global economy. They allow large enterprises to plan for future expenses and provide predictability in their operations by locking in a set price for an asset at a predetermined date.