Window forward contracts
What a window forward is
A window forward is a foreign exchange contract that fixes a rate right now, but keeps settlement flexible within an agreed window. Some providers list this as a flexible forward. This kind of contract fits when your business will receive an overseas payment at an uncertain time, perhaps you have a shipment waiting for customer sign-off, or you're not sure exactly when a partner will send proceeds, but you do have a likely timeframe.
By contrast, a standard forward fixes both the rate and the settlement date, so there's no wiggle room on when you pay or receive. With a window forward, you can settle anytime during the agreed period, which means the rate you'll get might not be as good as with a fixed-date forward, or there could be an added fee. If your timing is known, a fixed-date forward contract is simpler and usually a bit cheaper.
How drawdowns and the window work
When you set up a window forward, you lock in both the amount and the rate, then draw down (convert or settle) part or all of that amount on dates you choose during the window. Each drawdown happens at the fixed rate you secured, not whatever the market offers on the day. Once you've drawn the total agreed amount, the contract finishes. Windows can run a few weeks or stretch to several months, so choose dates that reflect real-world experience, like how long cross-border customers usually take to approve your invoice, instead of relying on optimistic forecasts.
If there’s money left under the contract at the window’s end, that remaining part is usually settled automatically then. The result depends on the rate and how your provider handles leftover amounts. Some may allow an extension. Others insist the outstanding sum be exchanged at the market rate or at penalties, so check details before you set up the contract.
The cost of flexibility
Extra flexibility comes at a price. Most providers price window forwards at a less attractive rate than fixed-date forwards for the same period, since the provider is exposed to uncertainty about your settlement timing. Sometimes, there’s an explicit fee. In other cases, you’ll just see fewer forward points in the offered price. Always calculate the final rate and compare it to a standard forward for the same last date, pay attention to the forward points included in the quote to spot the difference.
A window forward is a binding commitment: you’ve agreed to settle the total amount within the window, no matter what. If you won’t actually receive all the funds, you still need to deliver the currency. A written hedging policy can clarify which business risks you’re actually securing with this contract.
Worked example: drawing down a window
Here’s how it plays out in practice. Say a Polish manufacturer expects €200,000 from a German buyer but doesn’t know the exact payment date, just that it will happen sometime from March 1 through June 30 after goods are accepted. The business books a window forward for €200,000, with that window. If the buyer pays on May 15, the company draws the full €200,000 on that day at the agreed exchange rate. If payment comes later in June, the rate remains the same, so the business settles at any point within its window.
Frequently asked questions
Is a window forward more expensive than a fixed forward?
Yes, it often is, because the provider carries extra risk on timing. The price gap depends on the company, the currencies you’re booking, and how wide the window is. It’s a good idea to get quotes on both types for the same dates and compare the net rates before you choose a contract.
What happens to an unused window forward amount?
It is generally settled at the closing date of the window, and the rate then could be better or worse than what you secured up front. Contract terms do differ, some providers may let you extend or close early, but many don’t, so always check the treatment of any unused currency amount before you commit.