Discuss the difference between forward and future market

Expert Solution


	A future contract is an agreement between a buyer and seller to buy or sell an asset at a certain time in the future for a certain price.
	Similarly, a forward contract is also an agreement to buy or sell an asset at a particular time in the future for a certain price.

	The difference between forward and future contract are as follows:

	Forward	Future
	It is Private contract between two parties and is traded in over the counter market	Future contracts are traded on an exchange
	Forward contract asset size and type are not standardized	A future contract is standardized
	Gain or loss is realized at the maturity of the contract	Daily settlement of gain and losses i.e. marked to market
	Delivery of the asset usually takes place	The contract usually closes before the maturity
	It has usually one specific delivery date	It can have a range of delivery date
	There is a risk of default by the counterparty	There is no risk of default as the counterparty is the exchange

jeff jeffy answered 2 years ago

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