Difference between forward contract & futures contract
What is the difference between a forward contract and a futures contract?
A forward contract is a derivative instrument between two parties to buy or to sell an asset at a specified future time at a price agreed upon today. A forward contract is non-standardised. The party agreeing to buy the underlying asset in the future at the delivery price assumes a long position, and the party agreeing to sell the asset in the future assumes a short position. On the other hand, a futures contract is a derivative contract which is a standardised forward contract between two parties who agree to buy and sell an asset for a price agreed upon today at the forward price. The delivery and payment for the contract occurs at a future date known as the delivery date. The price of the futures contract varies as per the price of the underlying as adjusted for the carrying cost and corporate actions if any for an equity instrument.
