The level of margining in a futures contract takes as an important input

Question

Quizplus · Accepted Answer

The level of margining in a futures contract takes into account the volatility of the asset underlying the futures contract. This is because the more volatile the asset, the greater the risk of losses incurred by the parties involved in the trade. Therefore, higher levels of margin are required to protect against this risk. The trading volume, credit quality of counterparties, and the difference between initial and maintenance margin may also be considered but are not as significant as the volatility of the underlying asset.

The Level of Margining in a Futures Contract Takes as an Important