The difficulties associated with forward contracts can be eliminated by:
A) mandating a minimum amount to be paid by the buyer.
B) developing standardized weights, definitions, and expiration dates.
C) reducing the possibility of hedging and speculation.
D) reducing the liquidity of the forwards market.

Question

Quizplus · Accepted Answer

Standardizing weights, definitions, and expiration dates helps in eliminating the difficulties associated with forward contracts by making them more uniform and easier to trade, thus addressing issues like counterparty risk and market illiquidity.

The Difficulties Associated with Forward Contracts Can Be Eliminated By