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  • Diff Forward and Futures

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    Puja Dua
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    This document compares forward contracts and futures contracts. Forward contracts are tailor-made agreements between parties to buy or sell an asset at a specified future date and price, they are traded over-the-counter and involve high counterparty risk. Futures contracts are standardized exchange-traded agreements to exchange an asset for cash at a fixed price on a predetermined future date, they require initial margin and have low counterparty risk due to exchange regulation.

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    This document compares forward contracts and futures contracts. Forward contracts are tailor-made agreements between parties to buy or sell an asset at a specified future date and price, they are traded over-the-counter and involve high counterparty risk. Futures contracts are standardized exchange-traded agreements to exchange an asset for cash at a fixed price on a predetermined future date, they require initial margin and have low counterparty risk due to exchange regulation.

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    Download as XLSX, PDF, TXT or read online from Scribd
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    7 views3 pages

    Diff Forward and Futures

    Uploaded by

    Puja Dua
    This document compares forward contracts and futures contracts. Forward contracts are tailor-made agreements between parties to buy or sell an asset at a specified future date and price, they are traded over-the-counter and involve high counterparty risk. Futures contracts are standardized exchange-traded agreements to exchange an asset for cash at a fixed price on a predetermined future date, they require initial margin and have low counterparty risk due to exchange regulation.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
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    of 3

    BASIS FOR

    COMPARISON

    Meaning
    What is it
    Traded on
    Settlement
    Risk

    Default
    Size of contract
    Collateral
    Maturity
    Regulation
    Liquidity
    FORWARD CONTRACT

    Forward Contract is an agreement between parties to buy


    and sell the underlying asset at a specified date and
    agreed rate in future.
    It is a tailor made contract.
    Over the counter, i.e. there is no secondary market.
    On maturity date.
    High
    As they are private agreement, the chances of default are
    relatively high.
    Depends on the contract terms.
    Not required
    As per the terms of contract.
    Self regulated
    Low
    FUTURES CONTRACT
    A contract in which the parties agree to
    exchange the asset for cash at a fixed price
    and at a future specified date, is known as
    future contract.
    It is a standardized contract.
    Organized stock exchange.
    On a daily basis.
    Low

    No such probability.
    Fixed
    Initial margin required.
    Predetermined date
    By stock exchange
    High

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