Differences between forward contract and futures contract?
- 6 Answers
- 12641 Views
- Capital IQ, I also Faced
- E-Mail Answers
Answer Posted / akanksha saini
A futures contract, unlike the privately-traded forward
contract, is publicly traded. As with the forward, each
futures contract is for the purchase or sale of a loan,
currency or commodity with actual delivery scheduled to
occur at some time in the future. While the concept behind
both forwards and futures contracts is the same -- namely,
providing a way for buyers and sellers to lock in a price
today for transactions that will take place in the future --
the way in which they are implemented is, for the most part,
completely opposite.
While forward contracts are privately executed between two
parties who know each other (at least figuratively
speaking), futures contracts trade on the floor of a futures
exchange. And because they trade on the floor of an
exchange, the transactions are always handled by brokers who
are members of that exchange. No futures contracts are
executed by the parties themselves, thereby maintaining
anonymity throughout the process. For example when someone
buys pork bellies or U.S. T-bills via a futures contract,
they have no idea whom they are actually buying them from,
which brings up the subject of risk.
| Is This Answer Correct ? | 0 Yes | 2 No |
Post New Answer View All Answers
What's Monetary policy?
What Is Debt-to-income Ratio?
Give Any Three Disadvantages of Joint Stock Company?
What is the difference between primary and secondary market?
What are the different groups under which ratios are classified?
What are the different government policies towards unemployment?
What is Bill Purchase?
differentiate between revenue deficit and fiscal deficit?
Which banking services can be used through information technology (it)?
why there is a price band for IPO(initial public offer)? And at what price the investor can issue those ipos?
What are the pros and cons of the cashless economy?
What is fixed assets/ capital employed ratio?
What is the short cut to filter the information based on the monetary value all most from all report screens in Tally ERP 9?
What does the term weaker section mean?
What do you know about NIACL?
