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 cost-of-carry price is a model price under the stated assumptions, not a market price or fair-value claim. The no-arbitrage argument assumes borrowing and lending at one rate, deterministic rates, frictionless trading, no transaction costs, fees, taxes, credit risk, liquidity limits, collateral effects, or delivery frictions, and reliable delivery. US futures are CFTC-regulated. This is descriptive, not investment advice.

\text{pricing model, not investment advice}