Derivative

This query is : Resolved

taresh (Querist)
Follow

10 January 2014 please give me the simple example on forward contract and future contract. and state how these two differentiate from each other..?

P V Ram

P V Ram (Expert)
Follow

10 January 2014 Forward Vs. Future Contracts:
Sl. # Feature Forward Future
1 Trading Forward contracts are traded on personal basis on telephone etc. Future contracts are traded in competitive environment
2 Size No standard size Standardised sizes
3 Organised Exchanges Traded in over the counter market Traded in organised exchanges at designated locations.
4 Settlement Takes place on the date agreed by parties Takes place daily through exchange clearing house.
5 Delivery date Delivery to be made as per agreed terms Delivery dates are fixed in cycles.
6 Transaction costs Based on bid and ask spreads Brokerage fee is there on both buy and sell orders
7 Mark to Market No such procedure Mark to market is done on daily basis
8 Margins No margins are required Margins are required.
9 Credit risk Credit risk is born by each party No credit risk.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now