The key difference between a forward and a futures contract is:
A) a forward contract is customized where a futures contract is not.
B) a forward contract is bought and sold on organized exchanges.
C) only the forward contracts have settlement dates.
D) the amount of time involved.

Question

Quizplus · Accepted Answer

The key difference between a forward and a futures contract is that a forward contract is customized where a futures contract is standardized. In a forward contract, the buyer and seller can agree on specific terms such as price, quantity, and delivery date that are unique to their transaction. In contrast, futures contracts are traded on organized exchanges and are standardized in terms of contract size, delivery date, and quality specifications.

The Key Difference Between a Forward and a Futures Contract