3. Derivatives and Risk Management: Forward and Futures Contracts

Which of the following statements represent a key difference between forward and futures contracts?

Physical delivery of the underlying asset is taken with futures contracts, while the two parties of a forward contract simply settle with cash for the difference between the contracted price and the actual price on the expiration date.

Futures contracts are option contracts, while forward contracts are not option contracts.

Futures contracts are generally standardized instruments that are traded on exchanges, whereas forward contracts are generally tailor made, negotiated between two parties, and are not traded after they have been signed.

Forward contracts are marked to market on a daily basis, meaning that gains and losses are noted and money must be put up to cover losses.

All of the statements above identify key differences between forward and futures contracts.