What Are the Primary Reasons for Taking an Initial Margin

question 405

Multiple Choice

What are the primary reasons for taking an initial margin in a classic repo?

• A) Counterparty risk and operational risk
• B) Counterparty risk and legal risk
• C) Collateral illiquidity and counterparty risk
• D) Collateral illiquidity and legal risk

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Definitions:

Extrinsic Motivation

Motivation driven by external rewards such as money, fame, grades, or praise.

Self-efficacy

Someone's trust in their own skill to perform tasks needed for certain achievements.

Competence

The ability to do something successfully or efficiently, often referring to a specific skill set or knowledge area.

Intrinsic Motivation

the drive to engage in an activity for its own sake, deriving pleasure and satisfaction from the activity itself rather than from any external rewards.