clearlycanadian

All of the following are typically end users of forward contracts EXCEPT:

A) non-profit institutions.

B) governmental units.

C) a forwards dealer.

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A dealer is not an end user. Dealers typically take offsetting positions with different end users to limit their exposure to the asset price risk in individual forward contracts.

clearlycanadian

Which of the following statements regarding forward contract dealers is NOT correct?

A) Forward contract dealers are often banks.

B) Dealers are compensated through up-front payments by the parties to forward contracts.

C) Dealers offer long and short forward contracts at different prices.

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There is typically no payment from either the long or the short to enter into a forward contract. Dealers make money through the bid-ask spread, the difference between the forward prices they offer to buyers and sellers.