Forward contracts follow the principle of freedom of contract. It is a contract in which both parties agree to exchange financial assets at a fixed price in the future, and promise to conduct transactions in accordance with the currently agreed conditions in the future. Forward contracts are not fixed assets traded on exchanges and trading standards.

The terms of futures contracts are standardized. Futures contracts traded in the futures market are standardized in the quantity, quality grade, delivery grade, premium standard of substitutes, delivery place and delivery month, which makes futures contracts universal. In the futures contract, only the futures price is the only variable, which is generated by public bidding in the transaction.

2. The price is determined in different ways.

The two sides of the forward contract are directly negotiated and determined privately, which has information asymmetry and low pricing efficiency.

Futures contracts are determined by public bidding on the exchange, with fully symmetrical information and high pricing efficiency.

3. Different settlement methods

The expiration of forward contracts often leads to the delivery of the underlying assets, and no settlement is made during the period.

Futures contracts are settled every day, and the floating profit or loss is reflected in the margin account, and the contract will be closed before the expiration month.

Baidu Encyclopedia-Forward Contract

Baidu Encyclopedia-Futures Contract