NISM Certifications · NISM-Series-VIII: Equity Derivatives · Legal and Regulatory Environment
Which of the following is a feature of the SEBI-prescribed risk management framework for index and stock derivatives?
Initial margin is collected upfront and positions are marked to market daily. Both parties to a futures position must provide margin, and daily MTM settlement keeps losses from accumulating and protects the clearing corporation's guarantee.
- AInitial margin is collected upfront and positions are marked to market dailyCorrect
- BMargins are collected only at expiry
- COnly the seller of a futures contract pays margin
- DNo margin is required for positions in index futures
Explanation
The clearing corporation collects upfront initial margin (based on risk such as SPAN) from both buyers and sellers of futures and also collects daily MTM. Margins are not limited to expiry or only to sellers.
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