Difference

IPCC 610 views 4 replies

Difference between forward contracts & future contracts?

Replies (4)
Fundamentally, forward and futures contracts have the same function: both types of contracts allow people to buy or sell a specific type of asset at a specific time at a given price. However, it is in the specific details that these contracts differ. First of all, futures contracts are exchange-traded and, therefore, are standardized contracts. Forward contracts, on the other hand, are private agreements between two parties and are not as rigid in their stated terms and conditions. Because forward contracts are private agreements, there is always a chance that a party may default on its side of the agreement. Futures contracts have clearing houses that guarantee the transactions, which drastically lowers the probability of default to almost never.
Best place to search such things is investopedia website.
Please check the attachment for details..Jagadeesh

basicly both are same but when we talk about future contract... its standardized nature, traded by exchange, thats why there is less risk rather than forward contract..while forward contract is costumized nature, works with counter party (same as private agreement) ..hence it is more risky than future contract.

 


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