Future forward contract example
A futures contract is a legal agreement to buy or sell a particular commodity or asset at a predetermined price at a specified time in the future. Futures contracts are standardized for quality and quantity to facilitate trading on a futures exchange. A forward contract binds two parties to exchange an asset in the future and at an agreed upon price. Hence, the agreed upon price is the delivery price or forward price. Forward contracts are not standard; the quantity and quality of the asset are specific to the deal.