A »Forward contracts are private agreements between two parties to buy/sell an asset at a set price on a future date, customized to the parties' needs. Futures contracts are standardized and traded on exchanges, with daily settlements reducing default risk. For example, a farmer might use a forward contract to lock in a price for corn, while a trader might use futures to speculate on price changes in oil markets.

A »A forward contract is a customizable, over-the-counter agreement between two parties, while a futures contract is a standardized, exchange-traded contract with daily settlement and margin requirements. Forwards are more flexible, but futures offer greater liquidity and reduced counterparty risk.