Margin accounts have the effect of
A. Reducing the risk of one party regretting the deal and backing out
B. Ensuring funds are available to pay traders when they make a profit
C. Reducing systemic risk due to collapse of futures markets
D. All of the above
D
Initial margin requirements dramatically reduce the risk that a party will walk away from a futures contract. As a result they reduce the risk that the exchange clearing house will not have enough funds to pays profits to traders. Furthermore, if traders are less likely to suffer losses because of counterparty defaults there is less systemic risk.
You might also like to view...
Which of the following lists three of the major types of coalitions?
A. external coalitions, operating coalitions, and recurring coalitions B. latent coalitions, internal coalitions, and potential coalitions C. potential coalitions, operating coalitions, and recurring coalitions D. established coalitions, operating coalitions, and permanent coalitions
Herzberg's hygiene-motivation theory postulates that employees will become more productive when conditions in the work environment enable them to find intrinsic value in their work
Indicate whether the statement is true or false.
The perfect tender rule under the UCC obligates the seller to tender goods that exactly meet the requirements of the contract
Indicate whether the statement is true or false
Business risk refers to the relative dispersion of a firm's earnings before interest and taxes
Indicate whether the statement is true or false