A new type of forward contract called a Non deliverable forward contracts (NDF) is frequently used for currencies in emerging markets. Like a regular forward contract, an NDF represents an agreement regarding a position in a specified amount of a specified currency, a specified exchange rate, and a specified future settlement date. However, an NDF does not result in an actual exchange of the currencies at the future date. That is, there is no delivery. Instead, one party to the agreement makes a payment to the other party based on the exchange rate at the future date.
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