Up front payments for futures and forwards

CFA Level III
#1
  1. Do either futures or forwards require up-front payments? 2. If they don’t, when do we make payment on them?
#2

collateral and transaction costs

at settlement

#3

http://www.campbell.com/_files/Deconstructing%20Futures%20Returns%20-%20The%20Role%20of%20Roll%20Yield.pdf

#4

Ignoring transaction costs, futures don’t require upfront payments, but do require you to deposit collateral as cgrady40 mentions. (The collateral is still yours – that’s why it’s not called a payment – but you have to deposit it with the exchange. They don’t trust you. Apparently they’ve dealt with you before.)

Forwards are custom contracts, so they can do whatever they want. If they do not require upfront payments, they’re called _ market _ forwards; if they do require upfront payments, they’re called _ off-market _ forwards.

Similarly for FRAs and swaps.