NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Risk Management
A trading member's client buys shares in the cash segment. Which of the following is a margin component that is applied on the client's cash market positions as part of the clearing corporation's margining framework?
Extreme loss margin is a standard component of cash market margins, alongside VaR margin and mark-to-market margin. It covers losses that fall outside what VaR is expected to capture. The other options are not margin components in the cash market margin framework.
- AExtreme loss marginCorrect
- BExposure limit fee
- CSettlement guarantee levy
- DDelivery default penalty
Explanation
Cash market margins comprise VaR margin, extreme loss margin and, where applicable, mark-to-market margin. Extreme loss margin covers losses beyond those captured by VaR. The other items are not margin components in the cash market margining framework.
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