A Potential Disadvantage of Forward Contracts Versus Futures Contracts Is

question 52

Multiple Choice

A potential disadvantage of forward contracts versus futures contracts is:

• A)the extra liquidity required to cover the potential outflows that can occur prior to delivery.
• B)the higher incentive for a particular party to default.
• C)that the buyers and sellers don't know each other and never meet.
• D)the obligatory requirements rather than the optional opportunities.
• E)the increased ability to close out a position prior to expiration.

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Definitions:

Bolivars

The currency of Venezuela, used as a medium of exchange within the country.