Ch02HullOFOD6thEd - Mechanics of Futures Markets Chapter 2...

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Options, Futures, and Other Derivatives , 6 th Edition, Copyright © John C. Hull 2005 2.1 Mechanics of Futures Markets Chapter 2
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Options, Futures, and Other Derivatives, 6th 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
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Options, Futures, and Other Derivatives, 6th 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
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Options, Futures, and Other Derivatives, 6th Edition, 2.4 Example of a Futures Trade (page 27- 28) 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$3,000 in total)
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Options, Futures, and Other Derivatives, 6th Edition, 2.5 A Possible Outcome Table 2.1, Page 28 Daily Cumulative Margin Futures Gain Gain Account Margin Price (Loss) (Loss) Balance Call Day (US$) (US$) (US$) (US$) (US$) 400.00 4,000 5-Jun 397.00 (600) (600)
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This note was uploaded on 02/06/2012 for the course FINANCE 30090 taught by Professor O'neill during the Spring '11 term at University College Dublin.

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Ch02HullOFOD6thEd - Mechanics of Futures Markets Chapter 2...

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