Chapter 01 · Section 1.1

Counterparty Risk

                   Forwards             Futures

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

There is always a risk that one party to a contract be unable to fulfill his obligations. .. but who takes the risk in a futures contract?

a) The counterpart.
• b) The clearing house or clearing corporation.
  Yes. The clearing house acts as a counterpart to every holder and to every writer. It uses margin deposits to guarantee execution to both sides of every contract. Continue

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