Forward Price
The forward price is the agreed-upon value at which a forward contract is settled and delivered from seller to buyer at maturity. Unlike the spot price, which reflects the current market value of the underlying asset, the forward price incorporates the cost of carry—factors like interest rates, storage costs, and other expenses incurred over time. The formula for calculating it is: Forward Price = Spot Price + Cost of Carry (e.g., storage costs, interest rates). This adjustment accounts for the financial implications of holding the asset until the contract’s delivery date.
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