Match the vocabulary below with the following statements.
• organized market,
• maintenance margin,
• standardized contract,
• margin call
• standardized expiration,
• variation margin,
• clearing corporation,
• open interest,
• daily recontracting
• interest rate risk
• marking to market
• cross-hedge
• convergence
• delta-hedge
• settlement price
• delta-cross-hedge
• default risk of a future
• ruin risk
• initial margin
(a) Daily payment of the change in a forward or futures price.
(b) The collateral deposited as a guarantee when a futures position is opened.
(c) Daily payment of the discounted change in a forward price.
(d) The minimum level of collateral on deposit as a guarantee for a futures position.
(e) A hedge on a currency for which no futures contracts exist and for an expiration other
than what the buyer or seller of the contract desires.
(f) An additional deposit of collateral for a margin account that has fallen below its
maintenance level.
(g) A contract for a standardized number of units of a good to be delivered at a standardized
date.
(h) A hedge on foreign currency accounts receivable or accounts payable that is due on a day
other than the third Wednesday of March, June, September, or December.
(i) The number of outstanding contracts for a given type of futures.
(j) The one-day futures price change.
(k) A proxy for the closing price that is used to ensure that a futures price is not manipulated.
(l) Generally, the last Wednesday of March, June, September, or December.
(m)Organization that acts as a “go-between” for buyers and sellers of futures contracts.
(n) The risk that the interim cash flows must be invested or borrowed at an unfavorable
interest rate.
(o) A hedge on a currency for which no futures contract exists.
(p) The risk that the price of a futures contract drops (rises) so far that the purchaser (seller)
has severe short-term cash flow problems due to marking to market.
(q) The property whereby the futures equals the spot price at expiration.
(r) Centralized market (either an exchange or a computer system) where supply and demand
are matched.
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