Why Are Forward Contracts Typically Illiquid

question 52

Essay

Why are forward contracts typically illiquid?

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Definitions:

Gut-level

Relating to an instinctive emotional response rather than a rational process.

Biological Reactions

The complex biochemical processes and interactions that occur within living organisms, essential for maintaining life.

Catharsis Hypothesis

The theory that expressing or venting aggressive or other pent-up emotions leads to a release and reduction of those feelings.

Two-factor Theory

A concept in psychology that proposes that emotional experiences arise from a combination of a state of physiological arousal and a cognitive interpretation of that arousal.