Use the following statements to answer this question:
I.Forward contacts are more affected by credit risk than future contracts.
II.Clearinghouses improve the level of risk associated with futures transactions.
A)I and II are correct
B)I and II are incorrect
C)I is correct and II is incorrect
D)I is incorrect and II is correct

Question

Quizplus · Accepted Answer

I is correct because forward contracts are private agreements between two parties and are not standardized or traded on an exchange, making them more susceptible to credit risk. II is correct because clearinghouses act as intermediaries between buyers and sellers in futures transactions, reducing the risk of default by either party.

Use the Following Statements to Answer This Question