Which of the following is not a difference between futures and forward contracts?
A) Futures contracts are marked-to-market daily, while futures contracts are not.
B) Buyers and sellers deal directly with each other on forward contracts but go through and exchange with futures contracts.
C) Futures contracts are standardized, forward contracts generally are not.
D) Delivery rarely occurs on futures contracts but generally occurs with forward contracts.
E) All of the above are differences between futures and forward contracts.

Question

Quizplus · Accepted Answer

Futures contracts and forward contracts are both derivative contracts that obligate the buyer to purchase (or the seller to sell) an underlying asset at a specified price on a specified date. However, there are some key differences between the two types of contracts.Futures contracts are standardized contracts that are traded on an exchange. This means that all futures contracts for a particular underlying asset have the same terms and conditions. Forward contracts, on the other hand, are customized contracts that are negotiated directly between the buyer and seller. This means that the terms and conditions of forward contracts can vary depending on the specific needs of the parties involved.Another key difference between futures and forward contracts is the way that they are marked to market. Futures contracts are marked to market daily, which means that the price of the contract is adjusted each day to reflect the current market price of the underlying asset. Forward contracts, on the other hand, are not marked to market daily. This means that the price of the contract does not change until the contract matures.Finally, futures contracts are typically settled in cash, while forward contracts are typically settled by delivery of the underlying asset. This means that when a futures contract matures, the buyer and seller will exchange cash for the difference between the contract price and the current market price of the underlying asset. When a forward contract matures, the buyer and seller will exchange the underlying asset for cash.

Which of the Following Is Not a Difference Between Futures