I just want to make sure that there is a typo in this question and therefore an error in the answer. “Futures contracts ARE customized securities” in part C) right?
Which of the following is NOT a feature that distinguishes futures contracts from forward contracts? Futures contracts:
A) cover a specific quantity of the underlying asset. B) are regulated by the government. C) are not customized securities.
Your answer: C was incorrect. The correct answer was A) cover a specific quantity of the underlying asset.
Both futures contracts and forward contracts cover a specific quantity of the underlying asset. The other characteristics only apply to futures contracts.
I’m not an expert but i’m pretty sure that A is the correct answer. Forward contracts are customized between counterparties where Futures contracts are standardized on an exchange and regulated. I’m just studying for level 1 so don’t take me at my word until someone else confirms that.
Lol the irony. Sorry there was a typo in MY POST. The only thing I want to set straight is the fact that futures contracts ARE customized contracts, whereas forward contracts ARE NOT.
no futures contracts are standardizes… there is an exchange and they set rates on futures and waht not for people to trade on… with forward contracts you come to your OWN customized agreements with other counterparties directly.