A forward contract hedge is very similar to a futures contract hedge, except that ____ contracts are commonly used for ____ transactions.
A) forward; small
B) futures; large
C) forward; large
D) None of these are correct.

Question

Quizplus · Accepted Answer

Forward contracts are commonly used for large transactions, such as those in commodities, currencies, and real estate, where standardization is not possible. Futures contracts are more commonly used for smaller transactions and in more standardized markets such as stock indices and agricultural commodities. Thus, a forward contract hedge is better suited for large transactions.

A Forward Contract Hedge Is Very Similar to a Futures