What is the difference between Futures and Forwards? - ProProfs Discuss
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What is the difference between Futures and Forwards?

Asked by R. Jones, Last updated: Apr 14, 2020

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E. Barnes

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E. Barnes, Professional Gamer, Professional Gamer, Washington

Answered Apr 14, 2020

Futures and forwards are contracts usually used in the process of making hedge investments very simple. The futures are a financial contract, in which two parties would agree for a futuristic transaction. In a futures contract, a particular commodity would be bought by the buyer at a certain price, and also on the basis of a future date, which I would have been stated specifically in the agreement.

Most of the futures contracts don't usually end with the transfer of the commodity. Just like the other derivatives futures contract is used in order to hedge an investment process. The forward's contract, on the other hand, is in some ways similar to the futures contract.

There is also an agreement with a date in the future where the buyer, which could be an individual or a company will purchase the commodity at a certain price. Forwards contract can't be traded on the basis of exchange, while this is possible in the futures contract.

 

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