Asked by Santos Varela on May 31, 2024
Verified
Gains and losses on futures contracts are realized:
A) Only on the settlement day.
B) If the contract is exercised, otherwise, they are never realized.
C) Only if the buyer finds it profitability to exercise the contract.
D) On a daily basis through a process known as marking-to-market.
E) Only at the time the contracts mature.
Futures Contracts
Standardized legal agreements to buy or sell a particular commodity or financial asset at a predetermined price at a specified time in the future.
Marking-to-market
The practice of updating the value of an asset to its current market level rather than its book value for accounting purposes.
Settlement Day
The specific day on which the transfer of securities or commodities between buyer and seller is completed.
- Learn the key definitions and functions of various derivative contracts, including futures, options, and swaps.
Verified Answer
ZK
Zybrea KnightJun 05, 2024
Final Answer :
D
Explanation :
Gains and losses on futures contracts are realized on a daily basis through a process known as marking-to-market. This process adjusts the contract's value daily to reflect market changes, ensuring that gains and losses are recognized and accounted for in real-time.
Learning Objectives
- Learn the key definitions and functions of various derivative contracts, including futures, options, and swaps.