Why Is the Default Risk Much More Serious for Forward

question 32

Multiple Choice

Why is the default risk much more serious for forward contracts than for futures contracts?

• A)Because forward contracts are nonstandard contracts.
• B)Forward contracts are entered into bilaterally by the negotiating parties.
• C)For forwards, all cash flows are required to be paid at one time on contract maturity.
• D)Forwards are essentially OTC arrangements with no external guarantees in case of default.
• E)All of the options.

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To become accustomed to something through repeated exposure, often leading to decreased responsiveness.

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The ability of an organism to process and respond to sensory information received from the environment.

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Mental capabilities that include reasoning, problem-solving, planning, abstract thinking, complex idea comprehension, learning quickly, and learning from experience.

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