Explain Why a Forward Contract May Actually Carry More Risk

question 61

Essay

Explain why a forward contract may actually carry more risk than a futures contract.

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Definitions:

Torque Converter

A fluid coupling consisting an impeller, stator, and turbine used to transmit driving torque from an engine to transmission; it provides continuously variable drive ratios and can multiply torque.

Countershafts

Secondary shafts in a gearbox that carry gears of various sizes, affecting the gear ratio between the input and output shafts.

Allison TC10

A model of automatic transmission for commercial vehicles, offering fuel efficiency and durability, designed by Allison Transmission.

Input Torque

The amount of turning force applied to the input shaft of a mechanism or system, such as a gearbox, influencing its output torque and overall performance.