Non-Deliverable Forward (NDF)
A non-deliverable forward is an over-the-counter FX derivative that traders use to trade exposure to non-convertible currencies. Because NDF currencies are non-convertible, settlement is cash settled in a convertible currency. The NDF contract will lay out the agreed amount of the non-convertible currency, the delivery date and the forward rate. If the agreed forward rate is above or below the daily fix of the non-convertible currency’s central bank or another rate as agreed, the NDF holder will receive the difference in an agreed convertible currency or be required to pay the difference.