A forward contract:
A) Requires that payment in full be made when the contract is initially written.
B) Has a settlement price that fluctuates with daily movements in the marketplace.
C) Has a daily resettlement feature.
D) Provides options to, but does not obligate, the buyer or the seller.
E) Is a zero-sum game.

Question

Quizplus · Accepted Answer

A forward contract is a zero-sum game because the gain (or loss) of one party is exactly balanced by the loss (or gain) of the other party. It does not require payment at the initial writing (A), its settlement price does not fluctuate daily (B), it does not have a daily resettlement feature (C), and it obligates both the buyer and the seller to the terms, unlike an option (D).

A Forward Contract