Futures Contract Settlement

This question tests whether you understand one of the core derivatives products used in capital markets, including why futures exist, what the buyer and seller are agreeing to, and how the contract differs from a spot transaction. It also checks your ability to distinguish between physical delivery and cash settlement, which is especially important for explaining how futures are used across commodities and financial markets. Interviewers ask this because futures are fundamental to trading, hedging, and price discovery, and a strong candidate should be able to describe the contract mechanics clearly and precisely without confusing the economics of the trade with the settlement process.