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Forward market

The forward market is the informal over-the-counter financial market by which contracts for future delivery are entered into. Standardized forward contracts are called futures contracts and traded on a futures exchange.

It should not be confused with the futures market, as

  • Future contracts are traded in exchanges whereas a forward contract is traded over the counter.
  • The forward market is highly customized.
  • Each party has to deal with counterparty risk, unlike exchange-traded futures where the contracts are renovated.

See also