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      Question

      In a futures contract, marking-to-market refers

      to:
      A Daily settlement of gains and losses. Correct Answer Incorrect Answer
      B The final delivery of the underlying asset. Correct Answer Incorrect Answer
      C The initial margin payment. Correct Answer Incorrect Answer
      D The process of hedging. Correct Answer Incorrect Answer
      E None of these Correct Answer Incorrect Answer

      Solution

      A key feature of futures exchanges. Profits and losses are calculated and credited/debited to traders' margin accounts at the end of each trading day, reducing counterparty risk.

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