What Is a Forward Contract and How Does It Differ from a Futures Contract? ⎊ Path

What Is a Forward Contract and How Does It Differ from a Futures Contract?

Both are agreements to buy or sell an asset at a set price on a future date. A futures contract is standardized, traded on an exchange, and guaranteed by a clearinghouse.

A forward contract is customized, traded over-the-counter (OTC) between two parties, and carries counterparty risk. Futures are marked-to-market daily, while forwards are settled at expiration.

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