Which of the following is true?
A)Forward contracts have no default risk.
B)Futures contracts require an initial margin requirement be paid.
C)Forward contracts are marked to market daily.
D)Forward contract buyers and sellers do not know who the counterparty is.
E)Futures contracts are only traded over the counter.

Question

Quizplus · Accepted Answer

Futures contracts require an initial margin requirement be paid, which is not the case in forward contracts. Option A is incorrect as forward contracts do have default risk. Option C is incorrect as forward contracts are not marked to market daily. Option D is incorrect as forward contract buyers and sellers know who the counterparty is. Option E is incorrect as futures contracts can also be traded on exchanges.

Which of the Following Is True