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In securities Market, what is the difference between forward markets and future markets? Are they same?
From India , Coimbatore
From India , Coimbatore
Hi
There are some basic differences between forward and future markets
1. forwards are traded outside the exchange i.e, OTC (over the counter)
2.forwards..you can design contract according to your own terms i.e.quality ,contract size, expiration date..but in futures they are standardised by the exchange.
3.forwards..there is credit risk but in futures the exchange guarantees the settlement
4.in forwards price is not quoted like in futures on the exchange
5.forwards..you have to deliver the asset agreed upon...in futures there is no need
6.lack of liquidity and futures are liquid
regards
There are some basic differences between forward and future markets
1. forwards are traded outside the exchange i.e, OTC (over the counter)
2.forwards..you can design contract according to your own terms i.e.quality ,contract size, expiration date..but in futures they are standardised by the exchange.
3.forwards..there is credit risk but in futures the exchange guarantees the settlement
4.in forwards price is not quoted like in futures on the exchange
5.forwards..you have to deliver the asset agreed upon...in futures there is no need
6.lack of liquidity and futures are liquid
regards
Hi,
the basic differences bet forwards & futures are:
a) Forwards are Over the Counter in nature but Futures are traded on an organised stock exchange.
b) Forward are customised (so more liquid) but futures have standardised contract terms.
c) No margin payment is required to be paid for forwards but this is not the case with futures.
d) Also, settlement for a forward contract happens at the end of the period, whereas, futures follows daily settlement.
Regards,
Ruchika
From India , Gurgaon
the basic differences bet forwards & futures are:
a) Forwards are Over the Counter in nature but Futures are traded on an organised stock exchange.
b) Forward are customised (so more liquid) but futures have standardised contract terms.
c) No margin payment is required to be paid for forwards but this is not the case with futures.
d) Also, settlement for a forward contract happens at the end of the period, whereas, futures follows daily settlement.
Regards,
Ruchika
From India , Gurgaon
In finance, a futures contract is a standardized contract, traded on a futures exchange, to buy or sell a certain underlying instrument at a certain date in the future, at a pre-set price.
While futures and forward contracts are both a contract to trade on a future date, key differences include:
Futures are always traded on an exchange, whereas forwards always trade over-the-counter
Futures are highly standardized, whereas each forward is unique .
The price at which the contract is finally settled is different:
Futures are settled at the settlement price fixed on the last trading date of the contract (i.e. at the end) .
Forwards are settled at the forward price agreed on the trade date (i.e. at the start) .
The credit risk of futures is much lower than that of forwards:
Traders are not subject to credit risk due to the role played by the clearing house. The profit or loss on a futures position is exchanged in cash every day. After this the credit exposure is again zero.
The profit or loss on a forward contract is only realised at the time of settlement, so the credit exposure can keep increasing
In case of physical delivery, the forward contract specifies to whom to make the delivery. The counterparty on a futures contract is chosen randomly by the exchange.
In a forward there are no cash flows until delivery, whereas in futures there are margin requirements and periodic margin call.[color=darkblue]
From India , Gurgaon
While futures and forward contracts are both a contract to trade on a future date, key differences include:
Futures are always traded on an exchange, whereas forwards always trade over-the-counter
Futures are highly standardized, whereas each forward is unique .
The price at which the contract is finally settled is different:
Futures are settled at the settlement price fixed on the last trading date of the contract (i.e. at the end) .
Forwards are settled at the forward price agreed on the trade date (i.e. at the start) .
The credit risk of futures is much lower than that of forwards:
Traders are not subject to credit risk due to the role played by the clearing house. The profit or loss on a futures position is exchanged in cash every day. After this the credit exposure is again zero.
The profit or loss on a forward contract is only realised at the time of settlement, so the credit exposure can keep increasing
In case of physical delivery, the forward contract specifies to whom to make the delivery. The counterparty on a futures contract is chosen randomly by the exchange.
In a forward there are no cash flows until delivery, whereas in futures there are margin requirements and periodic margin call.[color=darkblue]
From India , Gurgaon
No my dear, this is not a same.It has some differences,but both is a future market.In india, NSE is a major player of the future contract. it has lot of future instruments like forward,future,options and swaptions.It wil be used the investors to safe their investments from the market volatility. now iam in office i will explain u further.please connect my mail id
From India , Erode
From India , Erode
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