Futures contract with Lehman
Quantitative Finance
Level
1
You sell a May Gold Futures contract from a Lehman Brothers trader. What happens when Lehman collapses?
Image credit: The logo is the trademark of Lehman Brothers.
Your futures contract is invalidated
You buy it back for $0 because they are bankrupt
The bankruptcy court will decide a suitable settlement
Nothing. Your contract is with the exchange
The SEC will guarantee the contract
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1 solution
Since you traded a futures contact, the trade was actually done with the exchange, and hence you are protected from counter-party risk like Lehman Brothers Collapsing.