What is the role of exchange in derivative instruments?

[suraj]

they are instrumental in the settlement of contracts on day to day basis.

[Praveen M]

Exchange has 2 main roles in Derivative instruments.

1. It protects the counter party risk by collecting a caution deposit(fully refundable) from both buyer and seller.

2. It makes the settlement of Ledger balance(difference between current market price and the strike price(in Options) or the speculated price(in Futures)) on a daily basis(MTM).

[vasanth]

difference between strike price and the speculated price is  settled between buyers and sellers

[sanjaivasan]

The derivative is a contract between the buyer and seller based upon the asset and its value is determined by the market fluctuations. The assets can be in the form of stocks, bonds, commodities etc.

[canute]

The Role of Exchange in derivative instruments.

The Exchange has 02 main roles.

1. It protects the counter party risk by collecting a caution deposit(Refundable) from both Buyers & Sellers.

2. It makes a settlement between current market price and strike price on daily basis.

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