Futures Versus Forwards
While futures and forward contracts are both contracts to deliver an asset on a future date at a prearranged price, they are different in two main respects:
- Futures are exchange-traded, while forwards are traded over-the-counter.
- Thus futures are standardized and face an exchange, while forwards are customized and face a non-exchange counterparty.
- Futures are margined, while forwards are not.
- Thus futures have significantly less credit risk, and have different funding.
The Futures Industry Association (FIA) estimates that 6.97 billion futures contracts were traded in the 2007, an increase of nearly 32% over the 2006 figure.
Read more about this topic: Futures Contract
Famous quotes containing the word futures:
“One of the things that is most striking about the young generation is that they never talk about their own futures, there are no futures for this generation, not any of them and so naturally they never think of them. It is very striking, they do not live in the present they just live, as well as they can, and they do not plan. It is extraordinary that whole populations have no projects for a future, none at all.”
—Gertrude Stein (1874–1946)