An expiration date payoff and profit diagram for forward positions illustrates
A) Gains and losses are usually small
B) The payoffs to both long and short positions in the forward contract are asymmetrical around the contract price
C) Forward contracts are zero-sum games
D) Long positions benefit from falling prices
E) None of the above

Question

Quizplus · Accepted Answer

Forward contracts are zero-sum games because the gain of one party is exactly the loss of the other party.

An Expiration Date Payoff and Profit Diagram for Forward Positions