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Answer: Guaranty deposit
## Explanation Option D (Guaranty deposit) best describes XYZ's contribution because: - **Variation margin (A)**: Daily cash flows to cover mark-to-market losses, which can be withdrawn when positions are closed - **Original margin (B)**: Initial collateral posted to cover potential future losses, typically returned when positions are closed - **Membership dues (C)**: Fees paid for exchange membership, not specifically for covering default obligations - **Guaranty deposit (D)**: This matches the description - funds contributed to the clearinghouse's default fund that cannot be withdrawn while the member remains active, specifically designed to cover defaults of other members The key characteristics that identify this as a guaranty deposit: - Designed to meet financial obligations of defaulting members - Cannot be withdrawn while remaining a member - Part of the clearinghouse's default protection mechanism - Contributed by all clearing members to mutualize default risk
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XYZ, a clearinghouse member, has recently contributed funds with its clearinghouse. The funds are designed to give the clearinghouse the ability to meet the financial obligations of any defaulting members. The funds may not be withdrawn by XYZ as long as it remains a member of the clearinghouse. Which of the following amounts best describe XYZ's contribution?
A
Variation margin
B
Original margin
C
Membership dues
D
Guaranty deposit
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