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 predetermined price on a future date. A Forward contract is a private, Over-The-Counter (OTC) agreement, customizable, and subject to counterparty risk.
A Futures contract is standardized, traded on an exchange, cleared through a clearing house, and has virtually no counterparty risk. Futures contracts also require daily marking-to-market.
Glossar
Forward Contract
Structure ⎊ A forward contract, within cryptocurrency and financial derivatives, establishes a customized agreement for the future exchange of an asset at a predetermined price and specified date.
Futures Contracts
Mechanism ⎊ Futures contracts, within cryptocurrency and broader financial derivatives, represent standardized agreements obligating parties to transact an asset at a predetermined price on a specified future date; these instruments facilitate price discovery and risk transfer, extending beyond traditional commodities to encompass digital assets and complex financial indices.