CFA Level I · CFA Level I Exam · Derivative Instrument and Derivative Market Features
Compared with a forward contract traded over the counter, a futures contract cleared through a central counterparty most likely has:
A cleared futures contract most likely has daily mark-to-market settlement and standardized terms. Margin is still required to support the clearinghouse guarantee, while customized terms and settlement only at maturity are features of over-the-counter forward contracts.
- Acustomized terms and settlement only at maturity
- Bdaily mark-to-market settlement and standardized termsCorrect
- Cno margin requirement because of the clearinghouse guarantee
Explanation
Futures are standardized and are settled daily through marking to market, with margin deposits supporting the clearinghouse guarantee. Customized terms and settlement at maturity describe forwards, and the guarantee does not remove margin requirements.
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