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What Is a Difference Between a Forward Contract and a Future

Question 55

Multiple Choice

What is a difference between a forward contract and a future contract?

A) The settlement price of a forward contract is fixed over the life of the contract but in a futures contract is marked to market daily.
B) Forward contracts are normally arranged through an organized exchange, while most futures contracts are OTC contracts.
C) Both are essentially the same, except for trading volumes which are higher for futures contracts.
D) Both are essentially the same, except for the fact that the terms of a forward contract is set by an exchange, subject to the approval of the Commodity Futures Trading Commission (CFTC) .
E) Delivery of the underlying asset almost always occurs on a futures contract but almost never occurs on a forward contract.

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