Difference between forwards and futures

Question

Accepted Answer

Forwards are customized contracts traded over-the-counter, while futures are standardized contracts traded on exchanges.

Forwards are customizable in terms of contract size, expiration date, and delivery terms, while futures have standardized contract specifications.
Forwards are traded over-the-counter (OTC) directly between two parties, while futures are traded on exchanges with a clearinghouse acting as a counterparty.
Forwards have higher credit risk due to lack of a clearinghouse, while futures have lower credit risk as the exchange guarantees performance.
Forwards may have higher liquidity risk compared to futures due to being less standardized and traded in smaller volumes.
Examples of forwards include customized currency contracts between two parties, while examples of futures include standardized contracts for commodities like oil or gold.

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