In the context of managing exchange rate risks, which of the following is true of a future?
A) Currencies are traded on an exchange.
B) A future is completely different from a forward contract.
C) A trader is committed to couple a spot transaction with a forward transaction.
D) Currencies are purchased from a bank.

Question

Quizplus · Accepted Answer

Futures involve trading currencies on an exchange, distinguishing them from forwards, which are over-the-counter contracts between two parties. Futures contracts standardize the quantity and quality of the underlying asset, providing a commitment to buy or sell at a future date, but not coupling spot and forward transactions in the way described for option C.

In the Context of Managing Exchange Rate Risks, Which of the Following