A Type of Risk Peculiar to a Forward Contract Is

question 8

Multiple Choice

A type of risk peculiar to a forward contract is called

• A)market risk.
• B)duration risk.
• C)currency risk.
• D)counterparty risk.

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Definitions:

Externalities

Unintended financial outcomes affecting individuals not directly engaged, potentially leading to good or bad impacts.

External Costs

Costs that are not borne by the producer or consumer of a good or service, but by society or the environment.

MSC (Marginal Social Cost)

The total cost to society of producing an additional unit of a good or service, including both the private costs and any external costs.

Efficient Level

Refers to the point at which a system, process, or economy operates at maximum productivity with minimal waste and expense.