A fixed price is a predetermined price agreed upon for future transactions, providing price certainty and eliminating market price risk for both buyers and sellers. Fixed-price contracts are common in commodity markets, long-term supply agreements, and forward transactions where parties want to lock in specific price levels regardless of future market movements.

Fixed-price arrangements transfer price risk from the parties to the broader market and are often used for budgeting, planning, and risk management purposes. While fixed prices provide certainty, they also eliminate opportunities to benefit from favorable price movements. The decision between fixed and floating prices depends on risk tolerance, market outlook, and operational requirements.

Real-world example: An airline signs a fixed-price jet fuel contract at $80 per barrel for the next year, providing cost certainty for budgeting but missing potential savings if fuel prices decline below $80.