Commodity fixed-price forward
Compare a contractual purchase or sale price with a chosen commodity reference, accounting for quantity and payment timing.
How it works
A fixed-price forward commits the parties to a price agreed in advance. OTCValue measures its economic value against either an organization's commodity quote or a selected listed Future. The reference must match the contract's currency and commodity unit.
Key contract terms
- Purchase or sale, quantity and counterparty
- Fixed contractual price per commodity unit
- Organization quote or exact listed Future reference
- Optional delivery start and end dates
- Required payment date, on or after delivery ends
Payoff: the contractual result
For a purchase, the value is quantity × (reference price − fixed price), discounted to the payment date. A sale reverses the sign. The delivery period does not create an average-price payoff.
A simple example
A buyer holds 100 tonnes at EUR 200 per tonne. With a reference of EUR 215, the value before discounting is 100 × (215 − 200) = EUR 1,500. The corresponding seller has EUR −1,500.
Illustrative amounts exclude fees and currency conversion. A payoff is distinct from the instrument's value before maturity.
Lifecycle
- Contract created
- Open exposure
- Execution or contractual boundary
- Contract finalized
Two paths to finalization
Execution recorded
Recording the execution closes the whole contract, including when executed quantity differs. It creates no new position.
No recorded execution
Terminal valuation uses the required exact reference at the contractual boundary. Missing data leaves finalization pending.
- Create the fixed-price contract with its quantity, reference and contractual dates.
- Recording an execution supplies the executed quantity and price and closes the whole contract, even when executed quantity differs from contractual quantity. It is not a series of partial deliveries.
- Without a recorded execution, terminal valuation requires the exact reference at the end of delivery, or at payment when there is no delivery period. Missing data leaves finalization pending.
- Authorized corrections or cancellation of an execution retain history and rebuild the contract result. No new position or payment instruction is generated.
Using this instrument in OTCValue
Final valuation requires the exact contractual observation; an expired Future uses its expiry settlement. Recorded execution uses the executed price and quantity and closes the whole contract, rather than tracking partial deliveries. A realized result does not confirm payment or arrange physical delivery.