What Does Agreement Price Mean
Agreement price is a term that is commonly used in the world of finance and trading. It refers to the price at which two parties agree to buy or sell a particular security or commodity at a future date. This price is usually negotiated between the buyer and the seller, and it is based on various factors such as market conditions, supply and demand, and the overall value of the asset in question.
When two parties enter into an agreement to buy or sell a security or commodity, they are essentially signing a contract that outlines the terms of the transaction. This contract includes details such as the quantity of the asset being sold or purchased, the delivery date, and the agreed-upon price.
Agreement price is an important concept in trading because it helps to reduce uncertainty and minimize risk for both parties. By agreeing on a price in advance, buyers and sellers can avoid the fluctuations in market prices that can occur between the time the contract is signed and the delivery date.
For example, let`s say that a farmer agrees to sell a certain quantity of wheat to a buyer at a future date. The two parties negotiate an agreement price of $5 per bushel. If the market price of wheat were to rise to $6 per bushel by the time of delivery, the buyer would still only have to pay $5 per bushel as per the agreement, even if they could have bought the wheat for less on the open market. Conversely, if the market price were to drop to $4 per bushel, the farmer would still receive $5 per bushel as per the agreement, even if they could have sold the wheat for less on the open market.
In summary, agreement price is the price at which two parties agree to buy or sell a particular security or commodity at a future date. This price is negotiated based on various factors and outlined in a contract that includes details such as the quantity of the asset being sold or purchased, the delivery date, and the agreed-upon price. By agreeing on a price in advance, buyers and sellers can reduce uncertainty and minimize risk.
- Posted by adriel
- On October 3, 2021
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