Generally speaking, the forward price of the contract will be negotiated according to the futures price at that time, which is only the futures price at the time of negotiation. After the signing of the forward contract, the forward price is fixed, but the futures price will still change and eventually converge to the spot price.
Forward contracts and futures contracts are both forms of transactions in which both parties agree to buy and sell a certain amount and quality of assets at a certain price at a certain time in the future. Futures contracts are standardized contracts formulated by futures exchanges, which stipulate the expiration date of contracts and the types, quantity and quality of assets to be bought and sold. Forward contracts are contracts signed by buyers and sellers according to their special needs. Therefore, the liquidity of futures trading is high and the liquidity of forward trading is low.
When the change of interest rate is unpredictable, the forward price and futures price are not equal. As for who is higher, it depends on the correlation between the underlying asset price and interest rate. When the underlying asset is positively related to the interest rate, the futures price is higher than the forward price. This is because when the price of the underlying asset rises, the futures price usually rises, and the bulls of futures contracts will immediately benefit from the daily settlement system, and they can reinvest their profits at an interest rate higher than the average interest rate. When the price of the underlying asset falls, the long position of the futures contract will lose money immediately because of the daily settlement system, and he can raise funds from the market at a rate lower than the average profit to supplement the margin. In contrast, long positions in forward contracts are not affected by changes in interest rates.
Therefore, in this case, futures bulls are more attractive than forward bulls, and futures prices are naturally greater than forward prices. On the contrary, when the underlying asset price is negatively correlated with the interest rate, the forward price will be higher than the futures price. The difference between forward price and futures price also depends on the length of contract validity. When the validity period is only a few months, the gap between them is usually very small. In addition, there are factors or differences such as taxes, transaction costs, handling methods of margin, default risk and liquidity. It will lead to the deviation between forward price and futures price.