Question
What triggers a variation margin call on a futures position?
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Answer
The margin account falls below maintenance margin.
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Question
Why does a futures trader face liquidity risk even before expiration?
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Answer
Daily margin calls create immediate cash funding needs.
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Question
When will the futures price tend to be slightly below the corresponding forward price?
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Answer
When futures prices are negatively correlated with interest rates.
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Question
Why can positive correlation between futures prices and interest rates make futures more attractive to a long than forwards?
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Answer
Gains arrive when rates are high, so they can be reinvested advantageously.
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