Difference between revisions of "Forward contracts"

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(New page: Forward contracts involve a contractual and personal relationship between buyer and seller who negotiate a buy/sell price for a particular commodity or goods. As compared to futures, forwa...)
 
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Forward contracts involve a contractual and personal relationship between buyer and seller who negotiate a buy/sell price for a particular commodity or goods. As compared to futures, forwards are not standardized in terms of quality or quantity and are not subject to the rules of an established exchange. In addition, a "clearing house" does not stand between buyer and seller to guarantee performance of the forward contract.
A forward contract is a private, cash-market agreement between a [[buyer]] and [[seller]] for the future [[delivery]] of a commodity at an agreed upon price. Unlike [[futures]] [[contract]]s, forward contracts are not standardized and not transferable. A [[clearing house]] does not stand between[[ buyer]] and [[seller]] to guarantee performance of the forward contract.

Revision as of 13:40, 10 July 2008

A forward contract is a private, cash-market agreement between a buyer and seller for the future delivery of a commodity at an agreed upon price. Unlike futures contracts, forward contracts are not standardized and not transferable. A clearing house does not stand betweenbuyer and seller to guarantee performance of the forward contract.