Q1. [1] § What is Commodity Derivatives Market?
A farmer agrees to sell his produce of wheat to a Miller, 6 months later when his crop is ready, he sells his wheat produce at a price that is agreed upon today by both the parties. Identify the type of contract.
Previously asked in CBSE board exam
2025 92 Q2 (v)
Generated by claude-sonnet-4-6 · 2026-06-15 07:08 · grounding rag
Model Answer
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.
Explanation
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.
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