A forward contract is a customized derivative contract obligating counterparties to buy (receive) or sell (deliver) an asset at a specified price on a future date. A forward contract can be used for hedging or speculation, although its non-standardized nature makes it particularly useful for hedging.

Here are some important differences between them. A forward contract is signed between party A and
party B face to face (or over the counter), whereas in a futures contract there is an intermediary
between the two parties. This intermediary is often called a clearance house, which is a part of a stock
exchange.