Assume that the mark-to-market settlements

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Reference no: EM131575383

Assume that you wrote 50 futures contract now, with delivery time t=1, and futures price $ 100.

Suppose that the Initial Margin is set at 20% and the Maintenance Margin is set at 10% of the Futures Prices.

Assume that the Mark-To-Market settlements take place at the end of every quarter.

Also , assume all the excess, if any, money from the margin/deposit account is withdrawn immediately .

The subsequent futures prices (delivery time 1) at the end of each quarter is given by: f(0.25, 1) = $ 95; f(0.5, 1) = $ 80; f(0.75, 1) = $ 90.

If the price of the underlying stock is $ 110 at the end of 1 year, then, Show all the step-by-step transactions that take place within the margin account, including the closing of the margin account at the end of the year.

Reference no: EM131575383

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