All of the following are roles of an exchange EXCEPT
A) instituting margin requirements on futures contracts.
B) marking to market at the end of each day.
C) eliminating the need for buyers and sellers of futures contracts to be concerned about the creditworthiness of each other.
D) reducing the default risk involving forward contracts.

Question

Quizplus · Accepted Answer

Exchanges reduce default risk for futures contracts, not forward contracts. Forward contracts are private agreements between parties and do not involve an exchange, thus the exchange cannot reduce default risk for these.

All of the Following Are Roles of an Exchange EXCEPT