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Up1
Which of the following would most likely be a reason to use a forward contract rather than a futures contract?
- Greater liquidity
- Ability to customize
- Lower counterparty default risk
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Up4
Greater liquidity and lower counterparty default risk are
advantages for futures contracts over
forwards.On the other hand, forward contracts allow much more customization than futures contracts. You can draft
a forward contract for almost anything, whereas futures contracts are limited
to the current market offerings.
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