Which of the following is not a difference between forward contracts and options?
A) Forward contracts carry credit risk, the possibility that the other party will not repay. Options do not have credit risk.
B) Forward contracts have a counter party. Options are standardized and the exchange is on the other side of the transaction.
C) Forward contracts are traded over-the-counter; options are traded on exchanges including the Chicago Board Options Exchange.
D) Forward contracts are an agreement for the immediate purchase of an asset, while options are commitments by two parties for a transaction at a specific point of time in the future.

Question

Quizplus · Accepted Answer

Forward contracts and options both involve agreements for transactions at a specific point in time in the future, not immediate purchases. Forward contracts obligate the transaction at a set future date, while options give the right, but not the obligation, to transact in the future.

Which of the Following Is Not a Difference Between Forward