Answer: traded over-the-counter.

## Explanation Forward contracts differ from futures contracts in several key ways: **Key Differences:** 1. **Trading Venue**: Forward contracts are traded over-the-counter (OTC), meaning they are privately negotiated between two parties, while futures contracts are traded on organized exchanges. 2. **Standardization**: Futures contracts are standardized in terms of contract size, expiration dates, and other specifications, whereas forward contracts are customized to meet the specific needs of the counterparties. 3. **Marking to Market**: Futures contracts are marked to market daily, meaning gains and losses are settled daily. Forward contracts typically settle only at expiration. 4. **Counterparty Risk**: Forward contracts have higher counterparty risk since they are not cleared through a central counterparty, while futures contracts are cleared through a clearinghouse that guarantees performance. **Why Option C is Correct:** - Forward contracts are indeed traded over-the-counter, which is one of their defining characteristics that distinguishes them from exchange-traded futures contracts. **Why Other Options are Incorrect:** - **Option A (standardized)**: This is actually a characteristic of futures contracts, not forward contracts. Futures are standardized, while forwards are customized. - **Option B (marked to market)**: This is a feature of futures contracts, not forward contracts. Futures are marked to market daily, while forwards typically settle only at expiration. **Additional Context:** Forward contracts are commonly used for hedging specific risks where customization is needed, while futures are preferred for more standardized hedging needs and speculative trading due to their liquidity and lower counterparty risk.

Author: LeetQuiz .