Why Is the Default Risk Much More Serious for Forward

question 2

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 these.

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Definitions:

Great Cardiac Vein

A vein that runs along the heart's surface, collecting deoxygenated blood from the myocardium.

Anterior Interventricular Branch

An artery that supplies blood to the front of the septum of the heart, part of the coronary circulation.

Oxygen-poor Blood

Blood that has a reduced oxygen content, typically found returning to the heart via the veins.

Interventricular Septa

The thick wall separating the lower chambers (ventricles) of the heart.