Understanding Futures Contracts

Very Easy Derivative Pricing And Valuation Futures Contracts

Futures contracts are standardized contracts that obligate the buyer to purchase, and the seller to sell, a specific asset at a predetermined price at a specified future date. These contracts are traded on exchanges, and they can be based on a variety of underlying assets, such as commodities, currencies, and indices.

Which of the following statements about futures contracts is true?

Futures contracts require the buyer to pay the full value of the contract at the time of purchase.

Futures contracts are typically settled by physical delivery of the underlying asset.

Futures contracts allow for price speculation without the need for initial capital outlay.

Hint

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