Short notes on Forward Contracts
Forward contracts are similar in many respects to futurescontracts. Like futures, there are frequently used to sell commodities that arenot immediately available for use. Unlike futures contracts, forward contractsinvolve two parties. Futures contracts are traded on an exchange, rather thanbeing an agreement between two parties. Another key difference is that forwardcontracts are often made with no intermediaries. On the other hand, futurescontracts are facilitated by brokers. While options and futures contracts arefrequently used by speculators, forward contracts are generally used to reducerisk for the producers and consumers of a product, rather than as aninvestment.