Certified Fraud Examiner Practice Exam 2025 – All-in-One Guide to Master Your Certification!

A futures contract is an agreement to buy or sell a specific asset at a predetermined price on a specified future date. This financial instrument is widely used in various markets, such as commodities, currencies, and stock indices, allowing participants to hedge against risks or speculate on price movements.

In a futures contract, both parties are obligated to fulfill the terms of the agreement once it reaches its expiration date. This characteristic makes futures unique compared to other types of contracts, where the obligation may not be as stringent. The predetermined price allows both the buyer and seller to manage uncertainty in the market, thereby providing a mechanism for price discovery and risk management.

The other options do not accurately represent a futures contract. A financial statement refers to a formal record of the financial activities of a business, a joint business venture implies a partnership for shared business endeavors, and an insurance policy is a contract that provides financial protection against potential future losses, which is fundamentally different from the buy/sell nature of a futures contract. Understanding this distinction is crucial for professionals involved in finance and trading.