4.11.2005

Q&A: Are listed futures default free?

A: Yes, as the clearinghouse of the futures exchange is interposed between buyers and sellers in every futures.
  • The net futures position of the clearinghouse is zero since the clearinghouse acts as buyer to every seller and seller to every buyer, all of its long positions are balanced by short positions.
  • it is highly capitalized and backed by large credit lines

Bonus Points

  • Margin: the down payment (or good faith deposit, or collateral) that traders put up with the clearinghouse. Requirements set by clearinghouses, expressed in dollar terms. Bears interest. control the risk of default (provide a financial safeguard to ensure that traders will fulfill their obligations). Also restricts trading activities so it should not be unreasonably high.
  • Marking to Market: Daily Settlement. traders are required to realize any gains/losses in cash on the day they occur. The clearinghouse engages in marking to market practice, in which gains and losses on a futures position are credited and charged to the trader's margin account on a daily basis.
  • The clearinghouse is not a U.S. government agency nor is it insured by the U.S.

Category: C++ Quant > Derivatives

No comments:

Post a Comment