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Question
Why is the default risk much more serious for forward contracts than for futures contracts?
A. Because forward contracts are nonstandard contracts.
B. Forward contracts are entered into bilaterally by the negotiating parties.
C. For forwards, all cash flows are required to be paid at one time on contract maturity.
D. Forwards are essentially OTC arrangements with no external guarantees in case of default.
E. All of the above.
Answer
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