{"id":43543,"date":"2022-12-15T10:21:50","date_gmt":"2022-12-15T10:21:50","guid":{"rendered":"https:\/\/analystprep.com\/cfa-level-1-exam\/?p=43543"},"modified":"2026-03-30T05:54:47","modified_gmt":"2026-03-30T05:54:47","slug":"why-forward-and-futures-prices-differ","status":"publish","type":"post","link":"https:\/\/analystprep.com\/cfa-level-1-exam\/derivatives\/why-forward-and-futures-prices-differ\/","title":{"rendered":"Why Forward and Futures Prices Differ"},"content":{"rendered":"\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"VideoObject\",\n  \"name\": \"Pricing and Valuation of Futures Contracts (2024\/2025 Level I CFA\u00ae Exam \u2013 Derivatives \u2013 Module 6)\",\n  \"description\": \"This video lesson covers derivatives, focusing on pricing and valuation of futures contracts. It compares futures to forward contracts, explains the cost of carry, daily marking-to-market, interest rate futures, and risk mitigation via margins and clearinghouses. Practical examples highlight calculations and key differences between these instruments.\",\n  \"uploadDate\": \"2022-12-03T00:00:00+00:00\",\n  \"thumbnailUrl\": \"https:\/\/img.youtube.com\/vi\/j97FeOxxdRk\/maxresdefault.jpg\",\n  \"contentUrl\": \"https:\/\/youtu.be\/j97FeOxxdRk\",\n  \"embedUrl\": \"https:\/\/www.youtube.com\/embed\/j97FeOxxdRk\",\n  \"duration\": \"PT21M57S\"\n}\n<\/script>\n\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"QAPage\",\n  \"mainEntity\": {\n    \"@type\": \"Question\",\n    \"name\": \"Which of the following statements is most likely true?\",\n    \"text\": \"Which of the following statements is most likely true?\\n\\nA. If there is a positive correlation between futures prices and interest rates, a long futures contract is more profitable than comparable long forward contracts.\\n\\nB. If futures prices and interest rates are negatively correlated, short forward positions are more attractive than a comparable short futures contract.\\n\\nC. Central clearing of derivatives increases the difference in futures and forward prices.\",\n    \"answerCount\": 3,\n    \"acceptedAnswer\": {\n      \"@type\": \"Answer\",\n      \"text\": \"The correct answer is A. When futures prices rise with interest rates, the profits from the long futures position can be reinvested during periods of high interest. Losses incurred when futures prices fall occur during decreasing interest rates.\"\n    }\n  }\n}\n<\/script>\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"ImageObject\",\n  \"@id\": \"https:\/\/analystprep.com\/cfa-level-1-exam\/images\/futures-forwards-convexity-bias\",\n  \"contentUrl\": \"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2022\/12\/CFA-Level-1-Futures-Forwards-Convexity-Bias-1024x622.jpg\",\n  \"url\": \"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2022\/12\/CFA-Level-1-Futures-Forwards-Convexity-Bias-1024x622.jpg\",\n  \"caption\": \"Futures and Forwards Prices \u2014 Convexity Bias\",\n  \"width\": 1024,\n  \"height\": 622,\n  \"copyrightNotice\": \"\u00a9 2024 AnalystPrep\",\n  \"acquireLicensePage\": \"https:\/\/analystprep.com\/license-info\",\n  \"creditText\": \"AnalystPrep Design Team\",\n  \"creator\": {\n    \"@type\": \"Organization\",\n    \"name\": \"AnalystPrep\"\n  },\n  \"isPartOf\": {\n    \"@type\": \"WebPage\",\n    \"@id\": \"https:\/\/analystprep.com\/cfa-level-1-exam\/derivatives\/why-forward-and-futures-prices-differ\/\"\n  }\n}\n<\/script>\n\n\n\n<iframe loading=\"lazy\"\n  width=\"611\"\n  height=\"344\"\n  src=\"https:\/\/www.youtube.com\/embed\/j97FeOxxdRk\"\n  title=\"YouTube video player\"\n  frameborder=\"0\"\n  allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\"\n  referrerpolicy=\"strict-origin-when-cross-origin\"\n  allowfullscreen>\n<\/iframe>\n\n\n\n<p>Forward and futures contracts share similar features; however, how they are traded and the resulting cash flows mean forward and futures contracts with the same underlying asset may trade at a different price.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Causes of Differences<\/h2>\n\n\n\n<h3 class=\"wp-block-heading\">1. Mark-to-Market (MTM), Margining, Settlement of Gains and Losses, and Risks<\/h3>\n\n\n\n<p>Comparable forwards and futures have symmetric payoff profiles at expiration. However, the pricing and valuation differ over the life of the comparable contracts. Remember that futures are exchange-traded derivative contracts. As such, the distinguishing features of future contracts include posting initial margin, daily mark-to-market, and settlement of gains and losses.<\/p>\n\n\n\n<p>On the other hand, a forward contract is an OTC contract where the credit terms are privately negotiated between the counterparties, and there are no daily mark-to-market (MTM) settlements. Consequently, forward contracts are riskier than futures contracts.<\/p>\n\n\n\n<p>One specific risk is counterparty risk, which is the risk that one party will default on the agreement. A forward contract is more prone to counterparty risk, particularly because settlement only occurs at maturity as a one-time cash settlement.<\/p>\n\n\n\n<div style=\"margin:20px 0\">\n<a href=\"https:\/\/analystprep.com\/free-trial\/\" target=\"_blank\"\nstyle=\"display:block;width:100%;text-align:center;padding:10px;border:2px solid #2f5bea;border-radius:40px;font-size:16px;color:#2f5bea;text-decoration:none\">\nPractice forward vs futures questions with our free trial.\n<\/a>\n<\/div>\n\n\n\n<h3 class=\"wp-block-heading\">2. <strong>Convexity Bias<\/strong><\/h3>\n\n\n\n<p>Convexity bias occurs when there are different price changes between interest rate futures and forward prices. Interest rate futures have a fixed linear payoff profile for a given change in basis point. On the other hand, interest rate forward (for example, FRAs) have non-linear relation with the basis point change (convexity property).<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"622\" src=\"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2022\/12\/CFA-Level-1-Futures-Forwards-Convexity-Bias-1024x622.jpg\" alt=\"\" class=\"wp-image-43890\" srcset=\"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2022\/12\/CFA-Level-1-Futures-Forwards-Convexity-Bias-1024x622.jpg 1024w, https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2022\/12\/CFA-Level-1-Futures-Forwards-Convexity-Bias-300x182.jpg 300w, https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2022\/12\/CFA-Level-1-Futures-Forwards-Convexity-Bias-768x467.jpg 768w, https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2022\/12\/CFA-Level-1-Futures-Forwards-Convexity-Bias-1536x933.jpg 1536w, https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2022\/12\/CFA-Level-1-Futures-Forwards-Convexity-Bias-400x243.jpg 400w, https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2022\/12\/CFA-Level-1-Futures-Forwards-Convexity-Bias.jpg 1590w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<p>Consequently, convexity bias causes the percentage price change to be greater in absolute value when MRR decreases than when it increases for a forward contract compared to a futures contract.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Causes of Similarities<\/h2>\n\n\n\n<h3 class=\"wp-block-heading\">1. Relationship between Interest Rates and Futures Prices<\/h3>\n\n\n\n<p>Despite the differences in (FRAs) pricing and valuation of futures and forwards, there are instances where their prices are equal. The following assumptions must hold for the futures and forward prices to be identical:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The interest rates must be constant.<\/li>\n\n\n\n<li>The futures prices and interest rates are uncorrelated.<\/li>\n<\/ul>\n\n\n\n<p>What happens when the above assumptions do not hold? For instance, if there is a positive correlation between futures prices and interest rates, the long futures contract is more profitable than the comparable long forward contract. Rising futures prices generate futures profits that are reinvested in periods of rising interest rates. Falling futures prices, on the other hand, attract losses incurred during periods of falling interest rates.<\/p>\n\n\n\n<p>When there is a negative correlation between the futures prices and interest rates, short futures contracts are more attractive than comparable short forward positions. This is because falling futures prices result in profits that are reinvested in periods of high-interest rates. Rising futures prices result in losses incurred during periods of falling interest rates.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">2. Central Clearing on OTC Derivatives<\/h3>\n\n\n\n<p>The emergence of central clearing of derivatives has resulted in futures-like margining requirements for over-the-counter (OTC) derivative dealers. For instance, dealers are required to post cash or highly liquid securities to a central counterparty. The dealers then impose the same requirements on the derivative end-users.<\/p>\n\n\n\n<p>As such, such a clearing structure on OTC derivatives has reduced the differences in prices between exchange-traded futures and OTC forward contracts.<\/p>\n\n\n<blockquote>\n<h2>Question<\/h2>\n<p>Which of the following statements is <em>most likely <\/em>true?<\/p>\n<p>A. If there is a positive correlation between futures prices and interest rates, a long futures contract is more profitable than comparable long forward contracts.<\/p>\n<p>B. If futures prices and interest rates are negatively correlated, short forward positions are more attractive than a comparable short futures contract.<\/p>\n<p>C. Central clearing of derivatives increases the difference in futures and forward prices.<\/p>\n<h3>Solution<\/h3>\n<p>The correct answer is <strong>A<\/strong>.<\/p>\n<p>When futures prices rise with interest rates, the profits from the long futures position can be reinvested during periods of high interest. On the other hand, losses incurred when futures prices fall occur during decreasing interest rates.<\/p>\n<p><strong>B is incorrect<\/strong>. When there is a negative correlation between the futures prices and interest rates, short futures positions are more attractive than comparable short-forward positions. This is because falling futures prices result in profits that are reinvested in periods of high-interest rates. Rising futures prices result in losses that are incurred during periods of falling interest rates.<\/p>\n<p><strong>C is incorrect<\/strong>. A clearing structure on OTC derivatives has reduced the differences in prices between exchange-traded futures and OTC forward contracts.<\/p>\n<\/blockquote>\n\n\n<div style=\"text-align:center;margin:40px 0\">\n<a href=\"https:\/\/analystprep.com\/free-trial\/\" target=\"_blank\"\nstyle=\"display:inline-block;padding:10px 26px;background:#3f78d7;color:#fff;border-radius:40px;font-size:16px;text-decoration:none\">\nStart Free Trial \u2192\n<\/a>\n<p style=\"margin-top:10px;max-width:600px;margin-left:auto;margin-right:auto;font-size:14px\">\nSolve CFA-style derivatives questions and master pricing differences between forwards and futures.\n<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Forward and futures contracts share similar features; however, how they are traded and the resulting cash flows mean forward and futures contracts with the same underlying asset may trade at a different price. Causes of Differences 1. Mark-to-Market (MTM), Margining,&#8230;<\/p>\n","protected":false},"author":13,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[10],"tags":[41],"class_list":["post-43543","post","type-post","status-publish","format-standard","hentry","category-derivatives","tag-why-forward-and-futures-prices-differ","blog-post","no-post-thumbnail","animate"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.9 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Why Forward &amp; Futures Prices Differ | CFA Level 1<\/title>\n<meta name=\"description\" content=\"Forward and futures prices differ due to trading methods and cash flow structures, even when based on the same underlying asset. Learn key distinctions.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/analystprep.com\/cfa-level-1-exam\/derivatives\/why-forward-and-futures-prices-differ\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Why Forward &amp; Futures Prices Differ | CFA Level 1\" \/>\n<meta property=\"og:description\" content=\"Forward and futures prices differ due to trading methods and cash flow structures, even when based on the same underlying asset. Learn key distinctions.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/analystprep.com\/cfa-level-1-exam\/derivatives\/why-forward-and-futures-prices-differ\/\" \/>\n<meta property=\"og:site_name\" content=\"AnalystPrep | CFA\u00ae Exam Study Notes\" \/>\n<meta property=\"article:published_time\" content=\"2022-12-15T10:21:50+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2026-03-30T05:54:47+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2022\/12\/CFA-Level-1-Futures-Forwards-Convexity-Bias.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1590\" \/>\n\t<meta property=\"og:image:height\" content=\"966\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Irene Rotich\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Irene Rotich\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/derivatives\/why-forward-and-futures-prices-differ\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/derivatives\/why-forward-and-futures-prices-differ\/\"},\"author\":{\"name\":\"Irene Rotich\",\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/#\/schema\/person\/5b869539aaec1c35c9bd0229b3cab96a\"},\"headline\":\"Why Forward and Futures Prices Differ\",\"datePublished\":\"2022-12-15T10:21:50+00:00\",\"dateModified\":\"2026-03-30T05:54:47+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/derivatives\/why-forward-and-futures-prices-differ\/\"},\"wordCount\":730,\"image\":{\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/derivatives\/why-forward-and-futures-prices-differ\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2022\/12\/CFA-Level-1-Futures-Forwards-Convexity-Bias-1024x622.jpg\",\"keywords\":[\"Why Forward and Futures Prices Differ\"],\"articleSection\":[\"Derivatives\"],\"inLanguage\":\"en-US\"},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/derivatives\/why-forward-and-futures-prices-differ\/\",\"url\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/derivatives\/why-forward-and-futures-prices-differ\/\",\"name\":\"Why Forward & Futures Prices Differ | CFA Level 1\",\"isPartOf\":{\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/derivatives\/why-forward-and-futures-prices-differ\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/derivatives\/why-forward-and-futures-prices-differ\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2022\/12\/CFA-Level-1-Futures-Forwards-Convexity-Bias-1024x622.jpg\",\"datePublished\":\"2022-12-15T10:21:50+00:00\",\"dateModified\":\"2026-03-30T05:54:47+00:00\",\"author\":{\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/#\/schema\/person\/5b869539aaec1c35c9bd0229b3cab96a\"},\"description\":\"Forward and futures prices differ due to trading methods and cash flow structures, even when based on the same underlying asset. Learn key distinctions.\",\"breadcrumb\":{\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/derivatives\/why-forward-and-futures-prices-differ\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/analystprep.com\/cfa-level-1-exam\/derivatives\/why-forward-and-futures-prices-differ\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/derivatives\/why-forward-and-futures-prices-differ\/#primaryimage\",\"url\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2022\/12\/CFA-Level-1-Futures-Forwards-Convexity-Bias.jpg\",\"contentUrl\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2022\/12\/CFA-Level-1-Futures-Forwards-Convexity-Bias.jpg\",\"width\":1590,\"height\":966},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/derivatives\/why-forward-and-futures-prices-differ\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Why Forward and Futures Prices Differ\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/#website\",\"url\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/\",\"name\":\"AnalystPrep | CFA\u00ae Exam Study Notes\",\"description\":\"\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/#\/schema\/person\/5b869539aaec1c35c9bd0229b3cab96a\",\"name\":\"Irene Rotich\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/secure.gravatar.com\/avatar\/366a023b8445bac92d497d497e299b92b6cda999c48a7af5ac49daea5ddb7d0f?s=96&d=mm&r=g\",\"contentUrl\":\"https:\/\/secure.gravatar.com\/avatar\/366a023b8445bac92d497d497e299b92b6cda999c48a7af5ac49daea5ddb7d0f?s=96&d=mm&r=g\",\"caption\":\"Irene Rotich\"},\"url\":\"https:\/\/analystprep.com\/cfa-level-1-exam\/author\/irene-rotichanalystprep-com\/\"}]}<\/script>\n<meta property=\"og:video\" content=\"https:\/\/www.youtube.com\/embed\/j97FeOxxdRk\" \/>\n<meta property=\"og:video:type\" content=\"text\/html\" \/>\n<meta property=\"og:video:duration\" content=\"1318\" \/>\n<meta property=\"og:video:width\" content=\"480\" \/>\n<meta property=\"og:video:height\" content=\"270\" \/>\n<meta property=\"ya:ovs:adult\" content=\"false\" \/>\n<meta property=\"ya:ovs:upload_date\" content=\"2022-12-15T10:21:50+00:00\" \/>\n<meta property=\"ya:ovs:allow_embed\" content=\"true\" \/>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Why Forward & Futures Prices Differ | CFA Level 1","description":"Forward and futures prices differ due to trading methods and cash flow structures, even when based on the same underlying asset. Learn key distinctions.","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/analystprep.com\/cfa-level-1-exam\/derivatives\/why-forward-and-futures-prices-differ\/","og_locale":"en_US","og_type":"article","og_title":"Why Forward & Futures Prices Differ | CFA Level 1","og_description":"Forward and futures prices differ due to trading methods and cash flow structures, even when based on the same underlying asset. Learn key distinctions.","og_url":"https:\/\/analystprep.com\/cfa-level-1-exam\/derivatives\/why-forward-and-futures-prices-differ\/","og_site_name":"AnalystPrep | CFA\u00ae Exam Study Notes","article_published_time":"2022-12-15T10:21:50+00:00","article_modified_time":"2026-03-30T05:54:47+00:00","og_image":[{"width":1590,"height":966,"url":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2022\/12\/CFA-Level-1-Futures-Forwards-Convexity-Bias.jpg","type":"image\/jpeg"}],"author":"Irene Rotich","twitter_card":"summary_large_image","twitter_misc":{"Written by":"Irene Rotich","Est. reading time":"3 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/derivatives\/why-forward-and-futures-prices-differ\/#article","isPartOf":{"@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/derivatives\/why-forward-and-futures-prices-differ\/"},"author":{"name":"Irene Rotich","@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/#\/schema\/person\/5b869539aaec1c35c9bd0229b3cab96a"},"headline":"Why Forward and Futures Prices Differ","datePublished":"2022-12-15T10:21:50+00:00","dateModified":"2026-03-30T05:54:47+00:00","mainEntityOfPage":{"@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/derivatives\/why-forward-and-futures-prices-differ\/"},"wordCount":730,"image":{"@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/derivatives\/why-forward-and-futures-prices-differ\/#primaryimage"},"thumbnailUrl":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2022\/12\/CFA-Level-1-Futures-Forwards-Convexity-Bias-1024x622.jpg","keywords":["Why Forward and Futures Prices Differ"],"articleSection":["Derivatives"],"inLanguage":"en-US"},{"@type":"WebPage","@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/derivatives\/why-forward-and-futures-prices-differ\/","url":"https:\/\/analystprep.com\/cfa-level-1-exam\/derivatives\/why-forward-and-futures-prices-differ\/","name":"Why Forward & Futures Prices Differ | CFA Level 1","isPartOf":{"@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/#website"},"primaryImageOfPage":{"@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/derivatives\/why-forward-and-futures-prices-differ\/#primaryimage"},"image":{"@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/derivatives\/why-forward-and-futures-prices-differ\/#primaryimage"},"thumbnailUrl":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2022\/12\/CFA-Level-1-Futures-Forwards-Convexity-Bias-1024x622.jpg","datePublished":"2022-12-15T10:21:50+00:00","dateModified":"2026-03-30T05:54:47+00:00","author":{"@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/#\/schema\/person\/5b869539aaec1c35c9bd0229b3cab96a"},"description":"Forward and futures prices differ due to trading methods and cash flow structures, even when based on the same underlying asset. Learn key distinctions.","breadcrumb":{"@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/derivatives\/why-forward-and-futures-prices-differ\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/analystprep.com\/cfa-level-1-exam\/derivatives\/why-forward-and-futures-prices-differ\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/derivatives\/why-forward-and-futures-prices-differ\/#primaryimage","url":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2022\/12\/CFA-Level-1-Futures-Forwards-Convexity-Bias.jpg","contentUrl":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-content\/uploads\/2022\/12\/CFA-Level-1-Futures-Forwards-Convexity-Bias.jpg","width":1590,"height":966},{"@type":"BreadcrumbList","@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/derivatives\/why-forward-and-futures-prices-differ\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/analystprep.com\/cfa-level-1-exam\/"},{"@type":"ListItem","position":2,"name":"Why Forward and Futures Prices Differ"}]},{"@type":"WebSite","@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/#website","url":"https:\/\/analystprep.com\/cfa-level-1-exam\/","name":"AnalystPrep | CFA\u00ae Exam Study Notes","description":"","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/analystprep.com\/cfa-level-1-exam\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Person","@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/#\/schema\/person\/5b869539aaec1c35c9bd0229b3cab96a","name":"Irene Rotich","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/analystprep.com\/cfa-level-1-exam\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/366a023b8445bac92d497d497e299b92b6cda999c48a7af5ac49daea5ddb7d0f?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/366a023b8445bac92d497d497e299b92b6cda999c48a7af5ac49daea5ddb7d0f?s=96&d=mm&r=g","caption":"Irene Rotich"},"url":"https:\/\/analystprep.com\/cfa-level-1-exam\/author\/irene-rotichanalystprep-com\/"}]},"og_video":"https:\/\/www.youtube.com\/embed\/j97FeOxxdRk","og_video_type":"text\/html","og_video_duration":"1318","og_video_width":"480","og_video_height":"270","ya_ovs_adult":"false","ya_ovs_upload_date":"2022-12-15T10:21:50+00:00","ya_ovs_allow_embed":"true"},"_links":{"self":[{"href":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-json\/wp\/v2\/posts\/43543","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-json\/wp\/v2\/users\/13"}],"replies":[{"embeddable":true,"href":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-json\/wp\/v2\/comments?post=43543"}],"version-history":[{"count":14,"href":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-json\/wp\/v2\/posts\/43543\/revisions"}],"predecessor-version":[{"id":60085,"href":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-json\/wp\/v2\/posts\/43543\/revisions\/60085"}],"wp:attachment":[{"href":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-json\/wp\/v2\/media?parent=43543"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-json\/wp\/v2\/categories?post=43543"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/analystprep.com\/cfa-level-1-exam\/wp-json\/wp\/v2\/tags?post=43543"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}