Differences Between Futures and Forward Contracts

While futures and forwards contracts both offer the opportunity to offset or assume risk of an asset, a key difference is that futures contracts are facilitated through a futures exchange while forwards are privately negotiated. Learn about the history of forward contracts and the futures market along with other differences and their potential benefits.

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This information is reproduced by permission of CME Group Inc. and its affiliates under license. CME Group Inc. and its affiliates accept no liability or responsibility for the information contained herein, including but not limited to the currency, accuracy and/or completeness of this information, and delays, interruptions, errors or omissions.

[kaka]

This is the best explanation I found here in youtube. Thank you so much

[Fred-ztky]

Forwards are only traded OTC, whereas futures can be traded on exchanges. Forwards are only settled on expiration date, whereas futures are settled on a daily basis until expiration. Those are the two main differences.

[smileyjing]

Very comprehensive and concise. Thanks!

[paulusamuthenu]

Absolutely amazing explanation... thanks.

[effingsix]

A mine is essentially a hole in the ground with a liar up at the top, since their metal content is required to be extracted before the commodity can be monetized. A mine worth building will take 20 years from discovery to commercial production, so the futures option on an exploration company becomes the equity in the exploration company.

Unless a mining prospect can somehow obtain a forwards contract for metals content, or be acquired by a larger established mining conglomerate, then the mining prospect will ultimately fail. Mining prospects might not have any revenue for years, relying solely on growth through issuance of equity.

Contractual arrangements for development of mines involve the use of escrow arrangements that attenuate risk to financial sources of CAPEX in mining, and involuntary changes of ownership.

[nissrine-]

thanks so much for going exactly to the point!!!!

[HLiao-rjsq]

How did you made this infographie explainer?

[arsalanahmed]

Amazing explanation. Also great animation. How did you create this?

[dennisadinath]

It's brilliant to see the use of animation, visual representation, and most importantly, comparison charts. One video served the purpose of several questions.

A playlist of shorts shared in the interest of public awareness

[ansonngpersonalgoogleaccou]

What is meant by futures contract on weather?

[akhiluniyal]

How can I edit like you ?.By the way great informative video

[LeahStruttSmith]

Mid 19th century means middle of 1800-1900. You mean mid 20th century