The forward price is the agreed-upon price for the delivery of an asset at a specified future date in a forward contract. It is determined at the time the contract is entered and is based on the current spot price of the asset, adjusted for the cost of carry—which includes the risk-free interest rate, storage costs (for physical commodities), and any income the asset generates (such as dividends for equities) over the contract period. The formula is broadly: Forward Price = Spot Price × e^(r-q)t, where r is the risk-free rate and q is the asset's yield. Forward prices are fundamental to derivatives pricing and reflect the market's expectation of what an asset will cost to acquire at a future date.
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