Question

On a futures exchange, to make sure that parties do not default on their obligations under the contract, the exchange will require parties to post sufficient _____________ in the form of a __________________ posted in each account to cover any losses.

Answer 1

On a future exchange to make sure that the parties do not default on their obligations under the contract, the exchange will require both parties to post sufficient collateral the form of a initial margin requirement  to cover any losses.

This collateral is required because in case of default , the amount is recovered from the initial margin.

I hope this makes sense.

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