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.
• b) According to general rules.
  No. Remember that all the contract clauses are negotiated directly between holder and writer in a forward contract . Why should margins be an exception?

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