An outright forward purchase agreement is a contract between the seller and the buyer that sets a fixed price for a specific asset at a predetermined future date. This type of agreement is commonly used in the financial industry, particularly in the foreign exchange market.

Outright forward purchase agreements are designed to help buyers and sellers lock in a price for an asset that they either want to buy or sell. This type of agreement is also known as a forward contract or simply a forward.

The process of an outright forward purchase agreement begins with the buyer and seller agreeing on a price for the asset. This price is often set at a premium or discount to the current market price, with the premium or discount reflecting the perceived risk associated with the underlying asset.

Once the price is agreed upon, the buyer and seller sign a contract that states the agreed-upon price, the asset being sold, and the date of settlement. Settlement is when the buyer pays the seller and takes ownership of the asset.

The benefit of an outright forward purchase agreement is that it allows buyers and sellers to hedge against potential price changes in the asset. For example, if a buyer believes that the price of oil will increase in the future, they can enter into an outright forward purchase agreement to buy oil at a fixed price, even if the market price of oil increases.

On the other hand, if a seller believes that the price of an asset will decrease in the future, they can enter into an outright forward purchase agreement to sell the asset at a fixed price, even if the market price of the asset decreases.

One of the potential drawbacks of outright forward purchase agreements is that they can be risky. If the market price of the asset ends up being lower than the agreed-upon price at the time of settlement, the buyer could end up overpaying for the asset, and the seller could end up losing money.

Overall, outright forward purchase agreements are a useful tool for buyers and sellers who want to lock in a price for a specific asset at a predetermined future date. However, it is important for both parties to understand the potential risks involved and to carefully consider whether an outright forward purchase agreement is the right choice for them.