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FBE459_Homework1

FBE459_Homework1 - UNIVERSITY OF SOUTHERN CALIFORNIA...

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UNIVERSITY OF SOUTHERN CALIFORNIA MARSHALL SCHOOL OF BUSINESS FBE 459 Financial Derivatives (P. Matos – Spring 2011) Homework 1 (date due: start of class on Monday, January 31 ) 1. Consider the futures contract to buy/sell December gold for $500 per ounce on the New York Commodity Exchange (CMX). The contract size is 100 ounces. The initial margin is $3,000, and the maintenance margin is $1,500. 1.a. Suppose that you enter into a long futures contract to buy December for $500 per ounce on the CMX. What change in the futures price will lead to a margin call? If you enter a short futures contract, what futures price will lead to a margin call? 1.b. What happens if you do not meet a margin call? 1.c. Suppose you buy a December gold futures at $500, on July 1st. You hold the position until selling on July 16th at $485.50. The daily prices on the intervening days are as shown in the table below. Complete the table below on gains/losses and charges/credits to the margin account.
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