Which One of the Following Statements Contrasting Options, Forwards, and Futures

question 209

Multiple Choice

Which one of the following statements contrasting options, forwards, and futures is correct?

• A) Both parties are obligated under an options contract while only one party is obligated under a forward contract.
• B) The buyer of a forward contract pays a premium when the contract is negotiated, the buyer of an options contract does not.
• C) Gains and losses on a futures contract are realized daily while gains and losses on a forward contract are realized only on the settlement date.
• D) Both forward and futures contracts are exercised only if the buyer so chooses.
• E) Options are marked to the market daily but futures are not.

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Definitions:

Backward Pairing

A conditioning procedure where the conditioned stimulus is presented after the unconditioned stimulus, often leading to weaker learning.

Simultaneous Pairing

A learning method where two stimuli are presented at the same time to create an association between them.

Extinction

In psychology, the gradual weakening and eventual disappearance of a conditioned response.

Spontaneous Recovery

The reappearance of a previously extinguished response after a period of no exposure to the conditioned stimulus.