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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.
- Though the forward market is not exchange traded, chances of parties defaulting are very low.