NCFM Derivatives Market (Dealers) Practice Questions - NCFM Derivatives Market (Dealers) Module Exam

How do forward contracts differ from futures contracts?

Forward contracts are standardized, while futures contracts are customized Forward contracts are traded on exchanges, while futures contracts are traded over-the-counter Forward contracts have high counterparty risk, while futures contracts have virtually no counterparty risk due to clearing house guarantees Forward contracts are settled daily, while futures contracts are settled only at maturity

Correct Answer:

Forward contracts have high counterparty risk, while futures contracts have virtually no counterparty risk due to clearing house guarantees

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