Through the Processes of Novation and Margin Payments, the Clearinghouse

question 76

Multiple Choice

Through the processes of novation and margin payments, the clearinghouse:

• A)becomes counterparty to each futures transaction
• B)seeks to protect traders from default risk
• C)will close out the position of defaulting traders
• D)guarantees the performance of futures contracts.
• E)All of these are correct.

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Definitions:

Marginal

Pertaining to the additional or incremental changes in costs, benefits, revenues, or other quantities, typically used in analysis of business decisions or economic policies.

Total Cost Curve

A graphical representation that shows the total cost of producing different quantities of output.

Ratio

A mathematical expression that represents the quantitative relationship between two numbers, showing how many times one value contains or is contained by the other.

Output

The total amount of goods or services produced by a firm, industry, or economy in a given period.