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Penelope Milburn
@milburnpenelope 21, Apr 2023 12:00 AM
Futures Contract and Forwards Contract
What is a difference between Futures Contract and Forwards Contract?
answers 1
Answer 1
Orion Bell
@bellorion71 28, Apr 2023 10:24 AM
A futures contract is a standardized contract which means that the buyer or seller of the contract can buy or sell in lot sizes that are already specified by the exchange and is traded through exchanges. Future markets have clearinghouses that manage the market and therefore, there is no counterparty risk.
Forwards Contract is a customizable contract which means that the buyer or seller can buy or sell any amount of contract they wish to. These contracts are OTC (over the counter) contracts i.e. no exchange is required for trading. These contracts do not have a clearinghouse and therefore, the buyer or the seller of the contract is exposed to the counterparty risk.