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Explain the basic differences between the operation of a currency forward market and a futures market.

Answer: The forward market is an OTC market in which the forward contract for purchase or sale of foreign currency is tailor-made among the client and its international bank. No money changes hands till the maturity date of the contract while delivery and receipt are commonly made.A futures contract is an exchange-traded instrument along with standardized features fixed contract size and delivery date.Futures contracts are marked-to-market every day to reflect modifications in the settlement price. Delivery is rarely made in a futures market. Rather a reversing trade is finished to close out a long or short position.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M9544803

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