how is the settlement of a forward contract decided?\n1) the clearinghouse has specific rules regarding…

how is the settlement of a forward contract decided?\n1) the clearinghouse has specific rules regarding settlement.\n2) the buyer has the freedom to decide how settlement will occur.\n3) revenue canada regulates the settlement of all derivatives in canada.\n4) it is agreed upon between the buyer and seller when the contract is initiated.

how is the settlement of a forward contract decided?\n1) the clearinghouse has specific rules regarding settlement.\n2) the buyer has the freedom to decide how settlement will occur.\n3) revenue canada regulates the settlement of all derivatives in canada.\n4) it is agreed upon between the buyer and seller when the contract is initiated.

Answer

Brief Explanations:

Forward contracts are private agreements between two parties (buyer and seller). The terms of the contract, including settlement details, are negotiated and agreed upon by both parties at the initiation of the contract. Clearinghouses are associated with exchange - traded derivatives (like futures), not forward contracts. The buyer alone cannot decide settlement as it is a bilateral agreement. Revenue Canada does not regulate the settlement of all derivatives in such a direct, contract - specific way for forward contracts.

Answer:

  1. It is agreed upon between the buyer and seller when the contract is initiated.