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Forwards and Futures Explained: How Can Leverage Wipe You Out? | Canadian Investing
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Episode Summary
This episode compares two derivative contracts with identical final economic outcomes but entirely different day-to-day journeys: forwards and futures. We begin with forwards—bilateral, fully customized contracts settled entirely at delivery (like our classic farmer and bakery agreement). While forwards minimize basis risk by perfectly matching your specific exposure, they carry severe counterparty risk, illiquidity, and the immense difficulty of finding a natural…
The skinny
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