One difference between futures contracts and forward contracts is that futures contracts are standardized (quality, quantity, expiration, delivery terms, etc.) while forward contracts are not (they can be customized). Select one: O True False
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- The advantage of using a forward rate agreement FRA over a futures contract is: * A. FRAs are highly standardized. B. FRAs have only an initial margin and no ongoing maintenance margin. C. the terms and conditions of a FRA can be negotiated. D. FRAs have standardized maturitiesExplain the main differences between futures contracts and forward contracts.Which of the following is NOT true O a. Futures contracts nearly always last longer than forward contracts O b. Delivery or final cash settlement usually takes place with forward contracts; the same is not true of futures contracts. O c. Futures contracts are standardized; forward contracts are not. O d. Forward contracts usually have one specified delivery date; futures contract often have a range of delivery dates.
- What is the main purpose of a hedging strategy using a forward contract or a futures contract? Explain very briefly.What are the key differences between future and forward contracts? a) direct contract for forwards b) clearing house for futures c) futures have less risk d) futures have a standard amountExplain what is meant by forward contracts and futures using examples. List the main advantages / disadvantages for their use.
- Discuss similarities and differences between futures contracts and forward contracts.3.How can options, futures, and forward contracts be used to devise simple hedging strategies? Discuss similarities and differences between futures contracts and forward contracts.Futures contracts offer more flexible terms than a forward contract. True False
- What is the difference between forward and futures contracts, focusing on the pros and cons of each.Define the terms, or give short explanations. -futures contract/option -hedge -hedger -hybrid -law of one price -market efficiencyWhich of the following is a reason why the default risk of a futures contract is assumed to be less than that of a forward contract? a. Forward contracts can be tailored, while future contracts are non-standardized. b. Forward contracts are classified as exotic derivatives. c. Futures contracts are exchange-traded contracts, daily settlements are implemented by the clearing house. d. More flexibility as the buyer can decide whether or not to exercise the contract at maturity. e. For futures contracts, all cash flows are required to be paid at one time on contract maturity.