The key difference between a forward and a futures contract is:
A)A forward contract is customized where a futures contract is not.
B)A forward contract is bought and sold on organized exchanges.
C)Only the forward contracts have settlement dates.
D)The amount of time involved.

Question

Quizplus · Accepted Answer

A forward contract is typically customized to meet the specific needs of the buyer and seller, whereas a futures contract is standardized and traded on organized exchanges. This customization in a forward contract also means that there may not be as much liquidity and transparency as there is in a futures market. The other answer choices (B, C, and D) are incorrect because they do not accurately describe the key difference between these two types of contracts.

The Key Difference Between a Forward and a Futures Contract