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Forward sale contracts (selling crops which didn't yet exist for example) were commonplace in the Roman empire and wholly valid under Roman law.
by tomatocracy 6y ago
Forward sale contracts (selling crops which didn't yet exist for example) were commonplace in the Roman empire and wholly valid under Roman law.
- PaulDavisThe1st 6y agoForward contracts and futures contracts have a number of important differences. Most notably, futures contracts involve assets that already exist, but will be traded in the future. Forward contracts involve assets that do not (typically) exist at the time of the contract, and will not be traded if they do not exist at the contract's specified date. They also serve quite different purposes for a society/economy.
- tomatocracy 6y agoWhilst there are difference, I'm not sure it's really true that the underlying always exists for futures. The main difference between the two is that futures are standardised contracts traded on an exchange and typically subject to daily margining/price settlement which has some impact on the behaviour of their price over time. Futures are useful to a broader group of people precisely because they don't need to involve physical settlement. Many people use commodity futures to hedge exposures to the price of assets which are not the underlying in the future but where there is a relatively predictable relationship between the two prices. Others use them to speculate on prices despite having no ability to deliver or take delivery of the underlying. Some contracts are even purely cash-settled. (Edit: made clear that it was the point that futures always involve an underlying which already exists I disagreed with.)