Futures versus forwards

Forwards:
· Negotiated privately in the OTC market,
· Customized
· Do not have any margin requirements
· Expose the parties to credit risk.
· Require no cash transaction until delivery date, usually not regulated

Futures:
· Standardized, exchange-traded contracts
· More liquid and so cheaper than forwards
· Buyers and sellers must deposit a margin with the exchange/clearing house
· Near-zero credit risk
· Regulated