CFA CFA Level 1 Question of the Week – Derivatives

Question of the Week – Derivatives

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    • AdaptPrep
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      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
    • AdaptPrep
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      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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