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    Question

    Daily settlement and margin requirement is the feature

    of which of the following types of derivative contracts?
    A Forward Correct Answer Incorrect Answer
    B Futures Correct Answer Incorrect Answer
    C Swaps Correct Answer Incorrect Answer
    D Options Correct Answer Incorrect Answer
    E All of the above Correct Answer Incorrect Answer

    Solution

    In case of Futures contract one is required to deposit funds with the broker, which is called as ‘margin’. The exchange usually sets the minimum margin required for different assets, but the broker can set higher margin limits for his clients which depend upon the credit-worthiness of the clients. The basic objective of the margin account is to act as collateral security in order to minimize the risk of failure by either party in the futures contract.

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