What Is a Key Difference between a Futures Contract and a Forward Contract?
Futures contracts are standardized, traded on an exchange, and typically require margin. They have a central clearing counterparty, which significantly reduces counterparty risk.
Forward contracts, however, are customized, traded over-the-counter (OTC), and carry higher counterparty risk. Both are agreements to buy or sell an asset at a predetermined price on a future date.
Glossar
Central Clearing
Mitigation ⎊ Central clearing, within cryptocurrency derivatives and options, functions as a financial intermediary establishing itself between counterparties to reduce systemic risk.
OTC Derivatives
Structure ⎊ OTC derivatives, operating outside regulated exchanges, represent privately negotiated contracts referencing underlying cryptocurrency assets, interest rates, or other financial instruments.