Chapter 01 · Section 1.1

Margin

                   Forwards             Futures

Contract Terms     variable             standard
Delivery           expected             only 2-5%
Trading            via phone            centralised
Margins            ........             ........
Credit Risk        ........             ........
Liquidity          ........             ........
Cash Flow          ........             ........

The margin is the amount of money deposited by each party to guarantee fulfillment of the contract. How do you think this amount is determined in forward trading?

• a) By negotiation.
  Yes. Margins, like any other detail of a forward contract, are negotiated between writer and holder - although standards are helpful and often exist. Continue
  b) According to general rules.

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