multiple choice

Novation changes the characteristics of the basic forward agreement. Which is not one of the ways?

a.3 parties, buyer, seller and a clearing house

b.Collateral is posted to protect against price change risk, counterparty risk

c.Both the buyer and seller have liquid positons

d.Customization is lost with novation

Buy position of a forward agreement is better than a long position in stock because

a.Smaller possible loss and larger gain

b.Statement is not true, longa forward and long in stock are equally good.

c.Forward requires not initial expenditure while buy stock require payment for the stock