A futures contract is a specialized form of a forward contract distinguished by an organized exchange which encourages confidence in the futures market by allowing for the effective regulation of trading.

Question

Quizplus · Accepted Answer

This statement is correct and describes the main difference between a futures contract and a forward contract. Futures contracts are traded on organized exchanges, which provide standardized terms and conditions, regulatory oversight, and a transparent pricing mechanism. This helps reduce counterparty risk and increase liquidity, making futures trading more accessible to a wider range of market participants.

A Futures Contract Is a Specialized Form of a Forward