Question

difference between forward and
schemes in foreign exchange market​

Answer 1

Answer:

Futures are traded on an exchange while forwards are traded over-the-counter. Futures contract is used by speculators, who bet on the direction in which an asset price will move. Forward contracts are, on the other hand, used by hedgers who want to eliminate the volatility in asset price movement.

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Answer 2

Explanation:

Forwards and futures contracts are both agreements to buy or sell a quantity of a financial or physical commodity at given price, on a specific future date. A currency forward contract is a private over-the-counter (OTC) transaction between counterparties known to each other, on terms agreed between them. The word private and OTC are important here because forwards are not traded on any recognized stock exchange. Hence the forward markets are generally open only to very large institutions, where there is an assurance that they will not default. Most small and medium sized traders and investors are outside the purview of the forward market.

A currency futures contract is an enhanced forward contract that is traded on a public stock exchange or currency exchange. In India, NSE and BSE are two of the major exchanges for trading currency futures. Structurally, the payoffs of a future and forward are the same. Both have scope for unlimited profits on the favourable side and unlimited losses on the unfavourable side.