The cash benefit declared by the issuer of capital is cash dividend. What is the margining system in the derivative markets?
• Initial Margin – Based on 99% VaR and worst case loss over a specified horizon, which depends on the time in which Mark to Market margin is collected. • Mark to Market Margin (MTM) – collected in cash for all Futures contracts and adjusted against the available Liquid Networth for option positions. In the case of Futures Contracts MTM may be considered as Mark to Market Settlement. Dr. L.C Gupta Committee had recommended that the level of initial margin required on a position should be related to the risk of loss on the position. The concept of value-at-risk should be used in calculating required level of initial margins. The initial margins should be large enough to cover the one day loss that can be encountered on the position on 99% of the days. The recommendations of the Dr. L.C Gupta Committee have been a guiding principle for SEBI in prescribing the margin computation & collection methodology to the Exchanges. With the introduction of various derivative products in the Indian s
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