Foreign Exchange: Non-Deliverable Forwards

Foreign Exchange: Non-Deliverable Forwards

Intuition Publishing Pty Ltd
Updated Sep 24, 2020

A non-deliverable forward (NDF) has two parties that agree to deliver a cash payment, which is the difference in the exchange rate between the NDF-traded price and the current spot price at maturity. We explain why it is said to be non-deliverable in the sense that the currencies bought and sold aren't delivered to the trading parties on the maturity date. We discover how the price is calculated and the differences between an NDF and a forward outright.