|Basis of Difference
|Forward Contracts are tailor made agreements wherein terms and conditions are determined by the parties involved in it .
|Futures contracts are standardised agreement wherein terms and conditions of the contract are decided by the regulating authority and every party entering into a contract follow the same rules and regulations .
|In case of forward contract , buyer and seller involved in the agreement directly negotiate with each other .
|In case of futures contract , buyer and seller do not know each other and negotiate through an intermediary known as “ Stock Exchange ” .
|Risk of Default
|Due to the absence of an intermediary between buyers / sellers , there is a very high probability of default by any or all the parties involved in the agreement .
|Futures contracts are settled through clearing houses that guarantee the successful implementation of the transactions .
|Forward contract does not force parties to make advance payment though it should not be a part of terms and conditions of an agreement .
|Parties entering in the futures contracts are obliged to deposit pre decided amount ( margin money ) with the regulating authority at the time of entering into a contract .
|Forward Contracts are the part of Over the Counter Market .
|Futures Contracts are the part of Centralized Stock Exchange ( s ) such as NSE , BSE .
|Cash flow takes place only once i . e . at time of expiration of the contract .
|Margin Account ( i . e . advance payment ) is settled on daily basis .
|Forward Contracts are settled by Physical Delivery of an underlying asset.
|Futures contracts are usually settled by cash .