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Lecture Financial derivatives - Lecture 8: Mechanics of futures markets

Lecture Financial derivatives - Lecture 8: Mechanics of futures markets. The contents of this chapter include all of the following: Other key points about futures, The clearing house and clearing margins, collateralization in OTC markets. | Lecture #08 They are settled daily. Min. Levels of initial and maintenance margin are set by the exchange. Margin requirements may depend on the objective of the trader. Day trades and spread transaction often give rise to lower margin requirement. The clearing house acts as an intermediary. It guarantees the performance of the two parties. It has a number of members who must post funds with the exchange. The main task of it is to keep track of all the transactions and calculate the net positions of its members. A clearing house member is required to maintain a margin with the clearing house (clearing margin). The main purpose of the margining system is to reduce default (credit) risk. Credit risk is a feature of the OTC market. A collateralization agreement between two parties require them to value the contract each day. It is becoming increasingly common for contracts to be collateralized in OTC markets They are then similar to futures contracts in that they are settled regularly (e.g. every day or every week) They were used by a hedge fund (LTCM) in 1990s. | Lecture #08 They are settled daily. Min. Levels of initial and maintenance margin are set by the exchange. Margin requirements may depend on the objective of the trader. Day trades and spread transaction often give rise to lower margin requirement. The clearing house acts as an intermediary. It guarantees the performance of the two parties. It has a number of members who must post funds with the exchange. The main task of it is to keep track of all the transactions and calculate the net positions of its members. A clearing house member is required to maintain a margin with the clearing house (clearing margin). The main purpose of the margining system is to reduce default (credit) risk. Credit risk is a feature of the OTC market. A collateralization agreement between two parties require them to value the contract each day. It is becoming increasingly common for contracts to be collateralized in OTC markets They are then similar to futures contracts in that they are settled regularly (e.g. every day or every week) They were used by a hedge fund (LTCM) in 1990s. . | Lecture #08 They are settled daily. Min. Levels of initial and maintenance margin are set by the exchange. Margin requirements may depend on the objective of the trader. Day trades and spread transaction often give rise to lower margin requirement. The clearing house acts as an intermediary. It guarantees the performance of the two parties. It has a number of members who must post funds with the exchange. The main task of it is to keep track of all the transactions and calculate the net positions of its members. A clearing house member is required to maintain a margin with the clearing house (clearing margin). The main purpose of the margining system is to reduce default (credit) risk. Credit risk is a feature of the OTC market. A collateralization agreement between two parties require them to value the contract each day. It is becoming increasingly common for contracts to be collateralized in OTC markets They are then similar to futures contracts in that they are