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?

Every futures exchange has an associated clearing house. The clearing house takes the other side of each transaction after the trade is cleared.