Futures differ from forwards because they are
A)used to hedge portfolios.
B)used to hedge individual securities.
C)used in both financial and foreign exchange markets.
D)a standardized contract.

Question

Quizplus · Accepted Answer

Futures are a standardized contract, meaning that the specifications for each contract, such as the underlying asset, contract size, expiration date, and delivery terms, are predetermined by the exchange on which they trade. This differs from forwards, which are customizable and tailor-made to meet the specific needs of the buyer and seller. Futures can be used for hedging, speculation, or as an investment in both financial and foreign exchange markets.

Futures Differ from Forwards Because They Are