There are a number of differences between forward and futures contracts. Which of the following statements is FALSE?
A) Futures have less liquidity risk than forward contracts.
B) Futures have less credit risk than forward contracts.
C) Futures have more default risk than forward contracts.
D) In futures, the exchange becomes the counterparty to all transactions.
E) Futures have standardized terms of agreement.

Question

Quizplus · Accepted Answer

Futures have less default risk than forward contracts because they are cleared through a central counterparty, whereas forward contracts are often settled directly between the two parties involved.

There Are a Number of Differences Between Forward and Futures