Daily settlement

Marking a futures position to market at the end of each day, with gains and losses paid through the margin account. The contract's value resets to zero after each settlement.

Where you will meet it

Daily settlement appears in 2 learning outcomes on the CFA syllabus. A few of them:

• Contrast futures with forwards on cash flows and counterparty credit risk
  CFA Level I · Derivatives

  “The daily settlement changes the timing of cash flows, which matters when interest rates are correlated with the underlying, and it forces a margin account that must be topped up on demand.”

• Explain the pricing of equity forwards and futures, and work out their no-arbitrage value and say what it means
  CFA Level II · Derivatives and Risk Management

  “Futures price the same way when rates are not random, but reset to zero value at each daily settlement.”

Practise it

• Today's practice question One question, with every wrong option explained.
• Free Level I diagnostic test Twelve questions that show which topics to start with.
• Free finance calculators Check your arithmetic on the exam's core formulas.

All terms beginning with D · Glossary