Explanation:
Futures are traded on organized exchanges, are standardized, are centrally cleared, and settle daily with marking to market. Forwards are traded on private (OTC) exchanges, are customized, are carrying counterparty risk, and settle at expiration.
(Book 3, Module 33.2, LO 33.g)
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Question 80
Futures contracts are different from forward contracts because:
A
futures are traded on private (OTC) exchanges, while forwards are traded on organized exchanges.
B
futures contracts are standardized, while forwards are customized to meet investor needs.
C
futures contracts have counterparty risk, while forwards are centrally cleared.
D
futures settle at expiration, while forwards settle daily.
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