Explanation:
A is correct. Threshold is the amount of uncollateralized exposure. A lower threshold value means a larger portion of exposure is protected by collateral.
In contrast, C is incorrect because a lower independent amount means a smaller initial margin is posted.
B is incorrect because the margin period of risk is the effective time assumed between a collateral call and receiving the appropriate collateral. Exposure may increase or decrease during this period.
D is incorrect. Collateral has little effect at both the beginning and the end of the exposure profile when the exposure is relatively small.
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A
A lower threshold value implies that a larger portion of exposure is protected by collateral.
B
A shorter margin period of risk implies that a smaller portion of exposure is protected by collateral.
C
A lower independent amount implies that a larger portion of exposure is protected by collateral.
D
The protection from collateral specified in the CSA is uniform throughout the life of the exposure profile.