Test Ch. 9-11 (2)

Test Ch. 9-11 (2) - [Type text] 1. A clearing corporation...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
[Type text] 1. A clearing corporation has a number of special institutional practices to reduce its own credit risk exposure. First, the seller (called a short) of a contract and the long (called a buyer) of a contract must place a deposit, called margin , with the clearing corporation. Margin is a performance bond that both buyers and sellers must deposit. 2. Hedgers are securities dealers who buy or sell futures contracts to reduce their exposure to the risk of future price movements of an underlying asset (ex. government bonds). The opportunity to hedge legitimate commercial activities is the most important activity provided by the futures market. 3. Options contracts are derivative financial instruments; that is, they derive their value from some underlying asset. In options, the contractual obligations call for the delivery of one futures contract, but the precise value depends upon the underlying asset. 4.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 2

Test Ch. 9-11 (2) - [Type text] 1. A clearing corporation...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online