Which of the following statements about forwards, futures, and options is correct?
A)Forward contracts and futures contracts are economically similar, but vary greatly in how they are traded.
B)Futures contracts and options contracts are economically similar, but vary greatly in how they are traded.
C)Forward contracts and options contracts are economically similar, but vary greatly in how they are traded.
D)Forward contracts, futures contracts, and options contracts are all economically similar, but vary greatly in how they are traded.

Question

Quizplus · Accepted Answer

Forward contracts and futures contracts are both agreements to buy or sell an asset at a specified price on a specified future date. They are economically similar because they both involve the same basic transaction, but they differ in how they are traded. Forward contracts are usually customized and traded over-the-counter, while futures contracts are standardized and traded on exchanges. Options contracts, on the other hand, give the buyer the right, but not the obligation, to buy or sell an asset at a specified price on or before a specified future date./options are economically different from both forwards and futures, and also differ in how they are traded.

Which of the Following Statements About Forwards, Futures, and Options