Ch02HullFundamentals5thEd

Ch02HullFundamentals5thEd - Mechanics of Futures Markets...

Info iconThis preview shows pages 1–6. Sign up to view the full content.

View Full Document Right Arrow Icon
Fundamentals of Futures and Options Markets , 5 th Edition, Copyright © John C. Hull 2004 2.1 Mechanics of Futures Markets Chapter 2
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Fundamentals of Futures and Options Markets, 5th Edition, 2.2 Futures Contracts Available on a wide range of underlyings Exchange traded Specifications need to be defined: What can be delivered, Where it can be delivered, & When it can be delivered Settled daily
Background image of page 2
Fundamentals of Futures and Options Markets, 5th Edition, 2.3 Margins A margin is cash or marketable securities deposited by an investor with his or her broker The balance in the margin account is adjusted to reflect daily settlement Margins minimize the possibility of a loss through a default on a contract
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Fundamentals of Futures and Options Markets, 5th Edition, 2.4 Example of a Futures Trade An investor takes a long position in 2 December gold futures contracts on June 5 contract size is 100 oz. futures price is US$400 margin requirement is US$2,000/contract (US$4,000 in total) maintenance margin is US$1,500/contract (US$3,000 in total)
Background image of page 4
Fundamentals of Futures and Options Markets, 5th Edition, 2.5 A Possible Outcome Table 2.1, Page 27 Daily Cumulative Margin Futures Gain Gain Account Margin Price (Loss) (Loss) Balance Call Day (US$) (US$) (US$) (US$) (US$) 400.00 4,000 5-Jun 397.00 (600) (600) 3,400 0 . . . . . . . . . . . . . . . . . . 13-Jun
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 6
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 10/07/2011 for the course FIN 416 taught by Professor Sankarshanacharya during the Fall '11 term at Ill. Chicago.

Page1 / 18

Ch02HullFundamentals5thEd - Mechanics of Futures Markets...

This preview shows document pages 1 - 6. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online