n NISM Certifications
XXI NISM Series XXI-A
Medium

The counterparty risk in a futures contract is mitigated primarily through _________.

Practice question from NISM XXI A for PMS - Mock Test 2 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. The functions of the clearing corporation

    Correct answer

  2. B

    Limits on positions and trading volumes

  3. C

    Collateralization by both parties

  4. D

    Settlement on a gross basis between two parties

Why this is the answer

The clearinghouse acts as a central counterparty, guaranteeing settlement and reducing counterparty risk.

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