The Advantage That Standardization of Futures Contracts Brings Is That

question 81

Multiple Choice

The advantage that standardization of futures contracts brings is that ________ is improved because ________.

• A) liquidity; all traders must trade a small set of identical contracts
• B) credit risk; all traders understand the risk of the contracts
• C) pricing; convergence is more likely to take place with fewer contracts
• D) trading cost; trading volume is reduced

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Definitions:

Assets And Liabilities

The financial rights or resources owned by a business (assets) and the obligations or debts it owes (liabilities).

Total Liabilities

The cumulative amount of all debts and obligations that a company owes to external parties or entities.

Priority

The status afforded to certain debts, making them more important or urgent to pay off compared to others in the context of liquidation or bankruptcy.

Unsecured Liability

A financial obligation that does not have collateral backing, meaning creditors may not have claims on the borrower's assets if the debt is not repaid.