Banking · Currency Derivatives
If Universal Bank (UB) decides to hedge its 50 million USD exposure using Currency Futures Contracts on an exchange, which requirement will most directly impact UB's daily liquidity management?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The standardization of contract size, which may not perfectly match the exposure.
- 2The mandatory use of the settlement price (SP) instead of the closing price (CP) for accounting.
- 3The necessity to maintain a Margin Account and meet daily Variation Margin Calls based on mark-to-market value.✓
- 4The requirement to execute the trade during specific market hours.
Correct answer
The necessity to maintain a Margin Account and meet daily Variation Margin Calls based on mark-to-market value.
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