The level of margining in a futures contract takes as an important input
A) The trading volume that underlies the contract.
B) The credit quality of counterparties trading in the futures market.
C) The volatility of the asset underlying the futures contract.
D) The difference between the initial and maintenance margin in the futures.

Question

Quizplus · Accepted Answer

The level of margining in a futures contract takes into consideration the volatility of the asset underlying the futures contract. This is because high levels of volatility can lead to wider price fluctuations and increase the risk for the exchange or clearinghouse. Therefore, a higher margin is required to cover potential losses.

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