In the Event of a Default on One Side of a Futures

question 4

Multiple Choice

In the event of a default on one side of a futures trade,

• A)the clearing member stands in for the defaulting party.
• B)the clearing member will seek restitution for the defaulting party.
• C)if the default is on the short side, a randomly selected long contract will not get paid. That party will then have standing to initiate a civil suit against the defaulting short.
• D)both a and b

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Definitions:

Money Supply

The sum of all financial resources in the form of cash, coins, and bank account balances present in an economy at a certain time.

Tight Money Policy

A monetary policy strategy used by central banks to slow economic growth by increasing interest rates and reducing the supply of money.

Government Bonds

Fixed-income securities issued by a government to support government spending, typically offering a regular interest payment and repayment of the principal at maturity.

Easy Money

A monetary policy stance characterized by low interest rates and high availability of credit to encourage economic growth.