In the case of a foreign exchange transaction, if there are at least three bank working days between the conclusion of the contract and the time of performance, so that the obligation and performance transaction clearly differ in time, it is a forward exchange transaction.
All currency forwards are also referred to as derivative currency instruments, as their value is derived from an underlying asset, which in the case of currency derivatives always embodies a certain amount of currency and its exchange ratio or exchange rate against a second currency or a basket of foreign currencies.
If the fulfillment of the transaction is binding for both parties, it is an unconditional or firm forward exchange deal. If, on the other hand, one of the business partners is given an option to exercise during or at the end of the contract term, this is referred to as a conditional forward exchange transaction or a Currency option business.
Trading in foreign exchange derivatives takes place either over the counter or on organized futures exchanges, depending on the financial instrument.