What is not considered a problem with forward transactions?
A)the difficulty in finding partners
B)default by one of the parties
C)convergence
D)one party reneges on the agreement

Question

Quizplus · Accepted Answer

Convergence is not considered a problem with forward transactions because it is actually a desirable outcome. Convergence refers to the narrowing of the gap between the spot price (the current price of an asset) and the forward price (the agreed upon price for future delivery of that asset). A narrowing of this gap indicates that the market is functioning efficiently and that the forward price accurately reflects the expected future spot price. Therefore, convergence is a positive aspect of forward transactions, rather than a problem.

A, B, and D, on the other hand, are all potential problems with forward transactions. Difficulty in finding partners can make it challenging to actually execute the transaction. Default by one of the parties can result in financial losses and legal disputes. And if one party reneges on the agreement, it can also lead to financial losses and legal issues.

What Is Not Considered a Problem with Forward Transactions