What Is a Difference Between a Forward Contract and a Future

question 149

Multiple Choice

What is a difference between a forward contract and a future contract?

• A)The settlement price of a forward contract is fixed over the life of the contract but in a futures contract is marked to market daily.
• B)Forward contracts are normally arranged through an organized exchange, while most futures contracts are OTC contracts.
• C)Both are essentially the same, except for trading volumes which are higher for futures contracts.
• D)Both are essentially the same, except for the fact that the terms of a forward contract is set by an exchange, subject to the approval of the Commodity Futures Trading Commission (CFTC).
• E)Delivery of the underlying asset almost always occurs on a futures contract but almost never occurs on a forward contract.

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Definitions:

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