This is a Forward Contract — a customized contract between two parties (farmer and miller) to sell wheat at a price agreed today, with settlement at a future date.

The key features here are: customized agreement, two specific parties, future settlement, and price fixed today — all defining characteristics of a forward contract. It is not a futures contract because futures are standardized and exchange-traded, which is not the case here.

(B) They are standardised and traded on exchanges.

Futures contracts are special types of forward contracts that are standardised exchange-traded contracts, unlike forwards which are customized.

Source: Types of Derivatives, Chapter 5

---

The key distinction examiners test here is futures vs. forwards:

• Forwards → customized, OTC, higher counterparty risk (Options A, C, D describe forwards/OTC instruments).
• Futures → standardised, exchange-traded, lower counterparty risk (because the exchange acts as counterparty/clearinghouse).

Always remember: "Futures contracts are standardized exchange-traded contracts" — this exact phrase from the textbook is the basis for the correct answer.

The term used is Option Premium. It is the price paid by the option buyer to the option seller for acquiring the right to buy or sell.

Source: What is an 'Option Premium'?, Chapter 5

The examiner expects you to name the term (Option Premium) and give a brief one-line definition. Since it is 1 mark, just the term alone may suffice, but adding a short definition ensures full credit.

(d) Commodity

Commodity derivatives market trade contracts for which the underlying asset is commodity, such as agricultural goods (wheat, cotton) or precious metals (gold, silver).

Source: What is Commodity Derivatives Market?, Chapter 5

This is a direct definition-based MCQ. The passage explicitly states "commodity derivatives market trade contracts for which the underlying asset is commodity." The other options (interest, currency, stock) are underlying assets for financial derivatives, not commodity derivatives. Always remember this distinction for exam purposes.

(D) Commodity — Commodity derivatives market trades contracts for which the underlying asset is a commodity, such as agricultural products (wheat, cotton) or precious metals (gold, silver).

Source: Chapter 5, What is Commodity Derivatives Market?

This is a direct definition-based MCQ. The passage explicitly states "Commodity derivatives market trade contracts for which the underlying asset is commodity." Options A (Index), B (Currency), and C (Stock) are underlyings for financial derivatives, not commodity derivatives. Always remember this key distinction.

(C) Assists, regulates, or controls the business of buying, selling or dealing only in commodity derivatives.

The commodity derivatives market specifically deals with contracts whose underlying asset is a commodity (agricultural or precious metals). Option (C) correctly captures its regulatory and facilitative role limited to commodity derivatives, distinguishing it from spot markets, logistics, or OTC markets.