When a standardized forward contract is traded on an exchange, it becomes a(n)
A)forward contract.
B)futures contract.
C)options contract.
D)swap contract.

Question

Quizplus · Accepted Answer

When a standardized forward contract is traded on an exchange, it becomes a futures contract. This is because the exchange sets the standard terms and conditions of the contract, including the underlying asset, contract size, expiration date, and settlement method. The exchange also acts as an intermediary between the buyer and seller, guaranteeing the performance of the contract. This standardized nature allows for liquidity and ease of trading.

When a Standardized Forward Contract Is Traded on an Exchange