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

Question

Quizplus · Accepted Answer

Through novation, the clearinghouse becomes the counterparty to every futures contract, which protects traders from default risk. The clearinghouse requires margin payments from traders to ensure that they have the financial resources to honor their obligations, and will close out the positions of defaulting traders. By assuming counterparty risk, the clearinghouse guarantees the performance of futures contracts. Therefore, all of the choices are correct.

Through the Processes of Novation and Margin Payments, the Clearinghouse