What Is the Primary Difference between Futures and Forward Contracts regarding Settlement?
Futures contracts are standardized and are subject to daily marking-to-market and cash settlement of profits and losses. Forward contracts are customized, privately negotiated, and typically settled only once at the expiration date.
This final settlement in a forward contract can be physical delivery or cash settlement. The lack of daily settlement is a key risk factor for forwards.
Glossar
Forward Contracts
Structure ⎊ Forward contracts, within cryptocurrency and financial derivatives, establish a customized agreement for the future exchange of an asset at a predetermined price and date, differing from standardized exchange-traded derivatives.
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.