Futures contracts differ from forward contracts in that

Question

Quizplus · Accepted Answer

Unlike forward contracts, futures contracts are standardized and can be bought or sold on an organized futures exchange. This allows for greater liquidity and flexibility, as the contract can be sold before the delivery date. Option A is incorrect because forward contracts also ensure a certain amount of currency at a future date. Option B is incorrect because both forward and futures contracts bind the parties into the deal. Option D is incorrect because futures contracts allow for changes in views about future exchange rates, as they can be bought or sold before the delivery date. Option E is also incorrect because futures contracts allow for immediate profit or loss realization through buying or selling on the exchange.

Futures Contracts Differ from Forward Contracts in That