An advantage of a forward contract over a futures contract is that
A) The terms of the contract are flexible
B) It is more liquid
C) It trades through a centralized market exchange
D) It is easier to unwind due to contract homogeneity
E) None of the above

Question

Quizplus · Accepted Answer

The terms of a forward contract can be customized to fit the specific needs of the parties involved, whereas futures contracts are standardized and have limited flexibility in terms of contract size, delivery dates, and settlement procedures. This flexibility can be beneficial for parties who have unique needs or requirements that cannot be met by a standardized futures contract.

An Advantage of a Forward Contract Over a Futures Contract