Clearing and Settlement of Derivatives

The settlement values are worked out as above but now, as the

index has declined in value, the fund manager must pay the interest

value plus the value of the fall in the index.

This has the effect of making the impact on the portfolio similar to

what would have happened had the fund manager purchased the

stock. In quarter one, the interest that was received on the cash was

paid away; if the manager had purchased stock there would have

been no interest received by the fund. The manager received the

monetary value of the change in the index and so the portfolio has

reflected a gain just as it would have ...