FRM Part I · FRM Exam Part I · Central Clearing
A clearing member holds a long position of 200 futures contracts cleared through a CCP. The contract multiplier is 50 units per contract. The settlement price moves from 80.00 yesterday to 78.40 today. Assuming daily variation margin settlement, what is the variation margin flow for the clearing member today?
The clearing member pays 16,000. The long position loses 1.60 per unit across 10,000 units (200 contracts times 50), and the CCP collects this loss as variation margin each day so that mark-to-market losses are settled in cash.
- APays 16,000Correct
- BReceives 16,000
- CPays 160,000
- DReceives 160,000
Explanation
Price change = 78.40 - 80.00 = -1.60 per unit. Contract exposure = 200 x 50 = 10,000 units. Loss = 1.60 x 10,000 = 16,000, so a long position pays 16,000. Receiving 16,000 reverses the sign; 160,000 mis-scales the units.
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