Which of the Following Is a Major Difference Between Forwards

question 31

Multiple Choice

Which of the following is a major difference between forwards and futures?

• A)Forwards are marked to market, while futures are not.
• B)Futures are tailor made, while forwards are standardised.
• C)The default risk of futures is significantly reduced by the futures exchange guaranteeing to indemnify counterparties against credit risk, while this is not the case for forwards.
• D)Forwards are marked to market, while futures are not, futures are tailor made, while forwards are standardised and the default risk of futures is significantly reduced by the futures exchange guaranteeing to indemnify counterparties against credit risk, while this is not the case for forwards.

---

Definitions:

Gasoline

A highly flammable liquid derived from petroleum, used primarily as fuel in internal combustion engines.

Quantity Demanded

Quantity demanded is the total amount of a good or service that consumers are willing and able to purchase at a given price over a specified period.

Demand Schedule

A tabular representation showing the quantity of a good that consumers are willing and able to purchase at different prices, holding other factors constant.

Excise Tax

A tax directly levied on certain goods, services, or activities, often included in the price of the product.