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Hello Sir,
Could you please help me with this question? I chose answers 2 and 3, but the book says 2 and 4. Isn’t a futures contract less flexible compared to a forward contract?In comparison to forward contracts, which TWO of the following are true in relation to futures contracts?
? They are more expensive
? They are only available in a small amount of currencies
? They are less flexible
? They may be an imprecise match for the underlying transactionIn comparison to forward contract, the correct answers are that they are essentially less flexible and they may be an imprecise match for the underlying transaction.
This is because:
Futures contracts have standardised terms and are traded on exchanges, which limits the ability to customise the contract to specific needs compared to forward contracts that can be tailored to the exact requirements of the parties involved.
They may be an imprecise match for the underlying transaction as they may not perfectly align with the specific amounts or timing of the underlying transaction, leading to potential mismatches.
Umm, The answers you said made more sense. I hope it won’t appear in a confusing form on the exam. Thank you so much!!
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