Why Do Most Futures Contracts Require Mandatory Cash Settlement? What

question 101

Essay

Why do most futures contracts require mandatory cash settlement? What does this entail?

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Definitions:

Effort

The amount of energy, work, or concentration applied towards a task or goal.

Valence

In psychology and motivational theory, the degree of attractiveness or aversiveness an outcome holds for a person, influencing their motivation levels.

Valence

The value or importance an individual places on the expected outcome of a particular behavior or action.

Expectancy

The belief or anticipation regarding the outcome of one's efforts, which can significantly influence motivation and behavior.