Ch 22: Assignment - International Financial Management Forward contracts are customized agreements in which one party agrees to buy a commodity at a specific price on a specific future date, and the other party agrees make the sale. Typically, the goods are actually delivered under these contracts. Both forward and futures contracts exhibit several unique features. Based on your understanding of these contracts, identify the differences between the two: Forward contracts Futures contracts Because there is an organized market for these contracts, they are highly liquid. These are nonstandardized contracts to buy or sell an asset at a specific time in the future at a specified delivery price. For the execution of these contracts, brokers require both parties to maintain margin accounts or performance bonds to ensure that payments are made when the contract matures. Consider the following statement: On behalf of General Forge and Foundry Company, Yanna deposited a check denominated in South Korean won into a bank in Brazil. This transaction was conducted in: Eurodollars Eurocurrency Forward and futures currency contracts impose an obligation to either buy or sell currency at a future date. In contrast, option contracts give the option- holder the right-but not the obligation to buy or sell a specific (underlying) asset at a specific price (called the exercise or strike price) on or before an expiration date. An American option allows you to exercise the option anytime on or before the expiration date