A Potential Disadvantage of Forward Contracts Versus Futures Contracts Is

question 30

Multiple Choice

A potential disadvantage of forward contracts versus futures contracts is:

• A) the extra liquidity required to cover the potential outflows that occur prior to delivery and caused by marking to market.
• B) the incentive for a particular party to default.
• C) that the buyers and sellers don't know each other and never meet.
• D) All of these.
• E) Both the extra liquidity required to cover the potential outflows that occur prior to delivery and caused by marking to market; and that the buyers and sellers don't know each other and never meet.

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