There Are a Number of Differences Between Forward and Futures

question 101

Multiple Choice

There are a number of differences between forward and futures contracts.Which of the following statements is false?

• A) Futures have less liquidity risk than forward contracts.
• B) Futures have less credit risk than forward contracts.
• C) Futures have more default risk than forward contracts.
• D) In futures, the exchange becomes the counterparty to all transactions.
• E) None of the above (that is, all statements are true)

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Definitions:

Maximin Criterion

A decision rule used in statistics, economics, and game theory that selects the action maximizing the minimum payoff possible from available choices.

Maximax Criterion

A decision rule used in scenarios of uncertainty to select the option with the maximum possible payoff, focusing on the most optimistic outcome.

Perfect Market Research

An ideal, comprehensive analysis of market conditions, consumer behaviors, and competitive landscapes to inform business decisions.

Perfect Information

Perfect Information is a situation in decision-making where all participants have access to all relevant facts and data, eliminating uncertainty.