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Non-Deliverable Forwards (NDFs) are financial derivatives used to hedge currency risks in countries with restricted or illiquid foreign exchange markets. Unlike traditional forward contracts, NDFs do not involve the actual delivery of the underlying currency. Instead, they settle in cash based on the difference between the agreed-upon exchange rate and the market rate at maturity. NDFs are commonly used by CFA Level 3 candidates and professionals to manage currency exposure, distinct from forward and futures contracts which involve physical delivery or exchange of assets.

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