A: Forward contract law refers to the method by which companies with foreign exchange claims or debts sign contracts with banks to sell or buy forward foreign exchange to eliminate foreign exchange risks. It can transfer the time structure from the future to the present through the signing of the contract, and realize the hedging of local currency and foreign currency within the specified time. Therefore, forward contract law can eliminate time risk and value risk.

(1) In order to prevent the depreciation of foreign exchange denominated in accounts receivable, the exporter signs a commodity contract with the importer and a forward contract with the foreign exchange bank to sell foreign exchange. The amount, currency and time are the same as those of foreign exchange receivables. After the foreign exchange is collected in the future, it will be delivered to the bank at the price agreed in the contract to obtain the local currency, which eliminates both the value risk and the time risk.

(2) In order to prevent the appreciation of foreign exchange denominated in accounts payable, importers sign forward contracts with foreign exchange banks to purchase foreign exchange while signing commodity contracts with exporters. The amount, currency and time are the same as those of foreign exchange payable. When the future payment is due, it will be delivered to the bank at the price agreed in the contract to obtain foreign currency, which eliminates both the value risk and the time risk.