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break forward

A break forward, also known as cancellable forward, cancellable option or knock-on forward, is an option-like contract used to obtain full participation in a market move in the underlying (for example, a currency) beyond a specified level without payment of an explicit option premium.

Break forwards are rarely used when hedging regular foreign currency inflows and outflows. They can be an efficient hedge tool, however, in the event of possible, but contingent, business events.