Certified Anti-Money Laundering Specialist Certification (CAMS) Practice Exam

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What type of contract requires delivery of a commodity at a specified future date?

Option Contract
Forwards
Futures
Swap Contract

The correct answer is: Futures

Futures contracts are agreements to buy or sell a commodity at a predetermined price on a specific future date. These contracts are standardized and traded on exchanges, which provide a regulated environment for the transaction. One of the key characteristics of futures contracts is that they require the delivery of the underlying asset (the commodity) on the specified date, which is known as the expiration date of the contract. This delivery aspect differentiates futures from other types of contracts, such as options, where the buyer has the right but not the obligation to execute the contract, and forwards, which are typically private agreements and more flexible but involve delivery terms that are negotiated directly between parties. Swaps focus on exchanging cash flows and do not typically involve the delivery of commodities.