What is the difference between Future and Forward Contracts.

Question

Accepted Answer

Future contracts are standardized and traded on exchanges, while forward contracts are customized and traded over-the-counter.

Future contracts are standardized agreements to buy or sell an asset at a predetermined price and date.
Forward contracts are customized agreements between two parties to buy or sell an asset at a mutually agreed price and date.
Future contracts are traded on exchanges, providing liquidity and transparency.
Forward contracts are traded over-the-counter (OTC), allowing for flexibility in terms and conditions.
Future contracts have daily settlement and margin requirements.
Forward contracts have no daily settlement and margin requirements.
Examples of future contracts include stock index futures, commodity futures, and currency futures.
Examples of forward contracts include customized currency hedging contracts, interest rate swaps, and commodity forward contracts.

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