A forward is economically similar to a futures contract: both parties fix the price of a future transaction. The difference lies in how they are concluded. A forward is an individual agreement between two parties, with terms such as volume, maturity, and settlement procedures determined to meet specific needs.
Flexibility comes at the cost of two limitations. First, there is no exchange guarantee of performance: the risk of counterparty default remains with the parties. Second, it is difficult to exit the contract early, as it is not traded on the market.
Primary use is currency hedging in corporate practice. A company with currency obligations locks in the exchange rate for future currency purchases, thereby eliminating uncertainty in planning, regardless of subsequent exchange rate movements. The downside: if the exchange rate moves favorably, no profit is realized—a forward eliminates not only risk but also opportunity.
The ability to conclude such transactions depends on the state of the foreign exchange market and the conversion regime, while demand for them reflects participants' expectations regarding exchange rate dynamics.