Which of the following is true for forward contracts?
A)They have standardized terms.
B)They have clearinghouses that guarantee the transactions.
C)They are private contracts between two parties.
D)The parties involved have a zero risk of defaulting on a contract.
E)They are marked-to-market daily.

Question

Quizplus · Accepted Answer

Forward contracts are private agreements between two parties, tailored to their specific needs, unlike futures contracts which are standardized and traded on exchanges. This customization allows for specific terms regarding the quantity of the asset and its delivery time, but it also means there's no central clearinghouse to guarantee the transaction, leading to a higher risk of default.

Which of the Following Is True for Forward Contracts