Chapter 01 · Section 1.1

Fowards versus Futures Table

                          Forwards             Futures

Contract Terms             variable             standard
Delivery                   expected             only 2-5%
Trading                    via phone            centralised
Margins                    negotiated           uniform
Credit Risk                taken by             clearing
                           counterparty         house
Liquidity                  ........             ........
Cash Flow                  ........             ........

• a) The forward market is likely to be more liquid than the futures market.
  No. Forward trading is done by phone, a time-consuming process. Entry into or exit out of the market is more difficult. A trader may not receive a price close to the one last traded or be certain it is the best price available.
  b) The futures market is likely to be more liquid than the forward market.

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