There are a number of differences between forward and futures contracts.Which of the following statements is false? A) Futures have less liquidity risk than forward contracts. B) Futures have less credit risk than forward contracts. C) Futures have more default risk than forward contracts. D) In futures, the exchange becomes the counterparty to all transactions. E) None of the above (that is, all statements are true)

Question

Quizplus · Accepted Answer

Futures contracts have less default risk than forward contracts since they are guaranteed by the exchange clearinghouse. In a forward contract, the counterparty is taking on the default risk of the other party. Therefore, statement C is false. Statements A, B, D are true.

There Are a Number of Differences Between Forward and Futures