Forwards vs Futures (Scope) - Forwards & Futures Step by Step

Forwards and futures differ in settlement mechanics.

highlighted = computed this step

Settlement timing

A forward settles once at maturity. A futures contract settles daily through margin, so gains and losses are realized along the way.

\text{forward: one final settlement}

Price link

When interest rates are deterministic, forward and futures prices coincide in this model, so both use the same cost-of-carry price.

F_0=S_0(1+r)^T

Model note

The no-arbitrage argument assumes borrowing and lending at one rate, frictionless trading, and reliable delivery. US futures are CFTC-regulated. This is descriptive, not investment advice.

\text{pricing model, not investment advice}