Question

The function which enables the trader
to fix forward rate is known as​

Answer 1

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Forward Exchange Contract (FEC)

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Answer 2

The function which enables the trader to fix the forward rate is known as​ Forward Exchange Contract (FEC).

• A forward exchange contract is an agreement in which an entity agrees to buy a certain amount of foreign currency at a specific future date. Purchases are made at a predetermined exchange rate. By entering into this contract, the buyer can protect himself from the subsequent fluctuations in the exchange rate of the foreign currency.
• The purpose of this contract is to consolidate foreign exchange reserves in order to avoid losses or to speculate about future changes in the exchange rate for profit.
• Advanced exchange rates can be obtained twelve months in the future; Quotes for large pearls (such as dollars and euros) can be obtained for five to ten years in the future.