Asked by
April Perkins
on Nov 06, 2024
Verified
The main difference between a futures contract and a forward contract is that with the former, buyers and sellers realize gains or losses on the settlement date, while the latter requires that gains or losses are realized daily.
Futures Contract
A standardized legal agreement to buy or sell something at a predetermined price at a specified time in the future.
Forward Contract
A non-standardized contract between two parties to buy or sell an asset at a specified future time at a price agreed upon today.
Settlement Date
The date on which a trade or transaction must be finalized with the transfer of the asset and payment completed.
- Gain insight into the primary differences between forward contracts and futures contracts.
- Recognize the concept of marking-to-market and its implications for futures contracts.
Verified Answer
JP
Learning Objectives
- Gain insight into the primary differences between forward contracts and futures contracts.
- Recognize the concept of marking-to-market and its implications for futures contracts.
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