What is the difference between options, forward contracts and swaps

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Accepted Answer

Options give the holder the right, but not the obligation, to buy or sell an asset at a specified price. Forward contracts are agreements to buy or sell an asset at a future date for a specified price. Swaps involve exchanging cash flows or assets with another party.

Options provide the holder with the right, but not the obligation, to buy or sell an asset at a specified price within a certain time frame.
Forward contracts are agreements between two parties to buy or sell an asset at a future date for a specified price. They are binding and must be fulfilled.
Swaps involve the exchange of cash flows or assets between two parties. Common types include interest rate swaps and currency swaps.