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Answer: d) The delivery period is the same across commodities and exchanges in order to prevent arbitrage, but the buyer (i.e., the long position) gets to make the decision on exactly when to receive delivery within the delivery period
The false statement is **(d)**. In futures markets, the **short side** typically has the right to decide when to make delivery within the delivery period (subject to contract rules), not the long side. Why the others are true: - **(a)** Long and short futures positions generally face the same margin rules. - **(b)** Initial margin is usually held in an interest-bearing form, while variation margin is a daily cash settlement and typically does not earn interest. - **(c)** A clearinghouse or CCP becomes the counterparty to both sides of the trade and takes on the credit risk of each party.
Author: Manit Arora
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Q-709.2. Each of the following statements about futures and/or forwards is true EXCEPT, which is false?
A
a) Margin requirements are the same on short futures positions as they are on long futures positions.
B
b) In the case of a futures contract, initial margin typically does earn interest, but variation margin does not
C
c) When an exchange clearinghouse or central counterparty (an OTC CCP) accepts a transaction, in both cases, it assumes the credit risk of both buyer and seller
D
d) The delivery period is the same across commodities and exchanges in order to prevent arbitrage, but the buyer (i.e., the long position) gets to make the decision on exactly when to receive delivery within the delivery period
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