Question

Describe futures contracts and forward contracts and list two differences between them. (10 points) Futures contracts: Forward contracts: Difference: Difference:

Answer 1

Answer:

See Explanation Below

Step-by-step explanation:

The concept of forward contract is such that it is a form of accordance that exist between two parties (rhey buyer and seller) on a particular transaction which is to be carried out or executed at a later or future date.

While

The concept of futures contract is such a contract that exist between two parties where both parties agree to buy and sell a particular asset of specific quantity and at a predetermined price, at a specified date in future.

The differences between them are

1. Futures contracts are of high standard whereas the terms of each forward contract can be negotiated.

2 Futures are traded on an exchange whereas forwards are traded over-the-counter.