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:

Instrumentality

The probability that a particular first-level outcome will be followed by a particular second-level outcome.

Expectancy

The probability that a particular first-level outcome can be achieved.

Basic Psychological Needs

Fundamental needs that include competence, autonomy, and relatedness, which are essential for psychological health and well-being.

Autonomy

The capacity to make an informed, uncoerced decision independently, often related to personal or organizational freedom.