Which of the following is a (are)key difference(s)a manager should note in choosing between forward and futures contracts?

Question

Quizplus · Accepted Answer

The key difference between forward and futures contracts is that futures contracts have standardized terms, while forward contracts can be customized to meet specific needs. This means that managers can tailor forward contracts to their specific requirements, while futures contracts are more generic in nature. Exchange trading does not necessarily make forward contracts more liquid, as liquidity depends on the specific market conditions and demand for the contract. Default risk may also be similar for both types of contracts, depending on the creditworthiness of the counterparties involved. While forward contracts may require initial margin deposits and daily marking to market, futures contracts also typically require margin deposits and are subject to daily settlement procedures.

Which of the Following Is a (Are)key Difference(s)a Manager Should