Question

The advantage that standardization of futures contracts brings is that _____ is improved because ____________________.

Answer 1

The benefit of standardizing futures contracts is increased liquidity because all traders must trade a small number of similar contracts.

For the purpose of facilitating trading on a futures market, futures contracts are standardized for both quality and quantity. When purchasing a futures contract, the buyer assumes the responsibility for purchasing and receiving the underlying asset upon contract expiration.

The final trading day of a futures contract is known as expiration. Final settlement and delivery of a futures contract are carried out in accordance with the guidelines outlined by the exchange in the contract specifications document after the contract has expired.

In order to meet its short-term obligations or liabilities, a corporation must have the capacity to convert its assets into cash.

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