
Ultimate access to all questions.
A risk manager is evaluating the choice between purchasing a futures contract on an exchange and acquiring a forward contract from a counterparty. Both the futures and forward contracts have identical maturity and delivery terms. In a scenario where arbitrage opportunities do not exist and there is an expectation of rising interest rates, what could be a reasonable singular factor that would result in the futures price being lower than the forward price?
A
The futures contract is less liquid than the forward contract.
B
The forward contract counterparty is more likely to default.
C
The price of the underlying asset is strongly negatively correlated with interest rates.
D
The transaction cost on the futures contract is more than that on the forward contract.