Explanation : Futures position holders are required to maintain a minimum level of
account balance which is called the maintenance margin requirement. The
amount sufficient to bring ending account balance back to initial margin
requirement is called the variation margin. Initial margin is the collateral or
performance bond that ensures the fulfillment of the obligation.
Explanation : While forward contracts and over-the-counter options are customized
private contracts between parties with a presence of default risk, futures
contracts have the least risk of default because of the presence of a
clearinghouse as an intermediary guaranteeing the parties against default
through the practice of daily settlement.
Explanation : A swap is an agreement between two parties to exchange a series of future
cash flows. Microsoft receives floating interest rate payments and makes
fixed interest rate payments. The given agreement is a swap.