A forward contract:
A) Requires that payment in full be made when the contract is initially written.
B) Provides the buyer with an option to buy an asset on the settlement date at the forward price.
C) Is a binding agreement which nets out as a zero sum game.
D) Is marked to the market daily.
E) Allows for immediate delivery at an agreed upon price which is to be paid on the settlement date.

Question

Quizplus · Accepted Answer

A forward contract is a binding agreement between two parties to buy or sell an asset at a specified price on a future date, which inherently makes it a zero-sum game because the gain (or loss) of one party is exactly balanced by the loss (or gain) of the other party.

A Forward Contract