A potential disadvantage of forward contracts versus futures contracts is:
A)the extra liquidity required to cover the potential outflows that occur prior to delivery and caused by marking to market.
B)the incentive for a particular party to default.
C)that the buyers and sellers don't know each other and never meet.
D)All of the above.
E)Both A and C.

Question

Quizplus · Accepted Answer

Forward contracts are private agreements between two parties, which can lead to a higher risk of default since they are not standardized or regulated like futures contracts.

A Potential Disadvantage of Forward Contracts Versus Futures Contracts Is