A futures contract
A)is tailor-made to fit the needs of the buyer and the seller.
B)has more credit risk than a forward contract.
C)is marked to market more frequently than a forward contract.
D)has a shorter time to delivery than a forward contract.
E)has more price risk than a forward contract.

Question

Quizplus · Accepted Answer

Futures contracts are marked to market on a daily basis, while forward contracts are not marked to market at all. This means that the price difference between the contract price and the market price is settled daily in a futures contract, while in a forward contract it is settled at maturity. Therefore, futures contracts have less credit risk than forward contracts. Options A, B, D, and E are incorrect.

A Futures Contract