Concerning foreign exchange trading, which of the following characterizes a forward contract?
A) It is an agreement between a holder and a writer.
B) Its contract size can be tailored to the needs of the exporter, importer, and so on.
C) Its date of delivery is non-negotiable.
D) It does not obligate a person to carry out a transaction if the price has changed.

Question

Quizplus · Accepted Answer

A forward contract is a customized agreement between a buyer and a seller to exchange a specific amount of currency for a predetermined price on a future date. The contract size can be tailored to the needs of the parties involved, making it a flexible instrument. The date of delivery is negotiable, as it is agreed upon by the buyer and the seller at the time of the contract. However, once the terms of the contract are established, they cannot be changed, which means that both parties are obligated to carry out the transaction, regardless of the price movement.

Concerning Foreign Exchange Trading, Which of the Following Characterizes a Forward