Marking to market involves
A)changing the futures price to the spot price each day.
B)engaging in arbitrage so as to reduce the risk involved with futures contracts.
C)crediting or debitting the margin account based on the net change in the value of the futures contract.
D)updating the futures price after the market closes each day.

Question

Quizplus · Accepted Answer

Marking to market involves crediting or debiting the margin account based on the net change in the value of the futures contract. This is done on a daily basis to reflect the current market value. The futures price does not necessarily change to the spot price each day, and engaging in arbitrage is not a necessary part of marking to market. Updating the futures price after the market closes each day is also not an accurate description of the process.

Marking to Market Involves