What Is the Difference between a Forward Contract and a Futures Contract?

A forward contract is a customized agreement between two parties to buy or sell an asset at a specified price on a future date. It is traded over-the-counter (OTC) and carries counterparty risk.

A futures contract is a standardized agreement traded on an organized exchange. Futures contracts are centrally cleared, which significantly reduces counterparty risk.

They also require margin payments and are marked-to-market daily.