A standardised agreement traded on an organised exchange for delivery of a specified security or commodity at a specified price on a predetermined date is a/an:
A) hedging contract.
B) futures contract.
C) option contract.
D) swap contract.

Question

Quizplus · Accepted Answer

A futures contract is a standardized agreement between two parties to buy or sell a specified asset, such as a commodity or security, at a predetermined price and date in the future, which is traded on an organized exchange. This allows for hedging against price fluctuations and speculation on the future price of the asset. Option contracts give the holder the right, but not the obligation, to buy or sell the asset, while swap contracts are agreements between two parties to exchange cash flows based on different financial instruments or indexes.

A Standardised Agreement Traded on an Organised Exchange for Delivery