Question: a. Please explain why the daily settlement procedure is an important tool in minimizing the credit risk in futures contracts. [10 marks] b. Consider

a. Please explain why the daily settlement procedure is an important tool in minimizing the credit risk in futures contracts. [10 marks] b. Consider a company using a short hedge position. Please explain what happens to its position when basis strengthens unexpectedly or when basis weakens unexpectedly. [10 marks]

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a The daily settlement procedure plays a crucial role in minimizing credit risk in futures contracts Heres why Marking to Market Futures contracts are marked to market daily which means that the gains ... View full answer

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