Difference between futures and forward contracts? Which is more riskier futures or forwards? Why?

Question

Accepted Answer

Futures and forward contracts differ in terms of standardization and exchange trading. Futures contracts are generally considered riskier due to their higher liquidity and potential for leverage.

Futures contracts are standardized and traded on exchanges, while forward contracts are customized and traded over-the-counter.
Futures contracts have higher liquidity and are more easily tradable compared to forward contracts.
Futures contracts often involve leverage, allowing traders to control larger positions with smaller initial investments.
Forward contracts are typically settled at the end of the contract period, while futures contracts are settled daily.
The risk in futures contracts is amplified due to the potential for leverage and daily settlement, making them more volatile and riskier than forward contracts.

Accepted Answer

The future contracts is very hard,but present contract much more easier compared to future contracts

Accepted Answer

Forwards are customised contract between buyer and seller whereas futures are standardized contacts which are trades on stock market. As forwards are customised contracts, there is risk of default by the parties and hence riskier than futures.

Asked in eClerx

Difference between futures and forward contracts? Which is more riskier futures or forwards? Why?

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