Financial markets & products
⏱ ~3-min readAceMark Guide
What this topic is really about
Futures contracts are standardized and traded on organized exchanges, featuring daily marking-to-market to minimize counterparty default risk. In contrast, forward contracts (Option A) are customized, over-the-counter agreements that lack daily margin settlement and are typically settled only at maturity.
The buyer of a long forward contract benefits when the spot price at delivery exceeds the agreed-upon forward price, allowing them to purchase the asset below its market value. If the spot price falls below the forward price instead, the buyer suffers a loss because they are locked into paying a premium.
See the mechanism
Futures contracts are standardized and traded on organized exchanges, featuring daily marking-to-market to minimize counterparty default risk. A diagram for this topic isn't available yet — the worked example below walks the same reasoning step by step.
An exam-style question, fully explained
A futures contract differs from a forward contract primarily by being:
- Identify what the question tests: A futures contract differs from a forward contract primarily by being:.
- Futures contracts are standardized and traded on organized exchanges, featuring daily marking-to-market to minimize counterparty default risk.
- In contrast, forward contracts (Option A) are customized, over-the-counter agreements that lack daily margin settlement and are typically settled only at maturity.
Traps the examiner sets
- Read each option carefully — distractors on Financial markets & products are designed to look plausible.
- Re-check the exact wording of the question stem before committing to an answer.
- Watch the qualifiers ("always", "only", "except") that flip a correct-looking option.
Test your recall
Answer each from memory — you'll see instantly whether you're right and why.
Run a focused 10-question mini-mock on Financial markets & products and see it stick.
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