HW 3 Solutions

HW 3 Solutions - Suggested Solution to HW 3 Problem 7.1(See...

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Suggested Solution to HW 3 : Note that the short side of a futures contract gains (loses) from a declining (increasing) price of the underlying asset. Thus, $1,700 + [($1.3140 - $1.3126) + ($1.3126 - $1.3133) + ($1.3133 - $1.3049)] x EUR125,000 = $2,837.50, where EUR125,000 is the contract size of one EUR contract. day settlement price Gain/Loss Account Balance 0 1.3140 0 1,700.00 1 1.3126 175 1,875.00 2 1.3133 -87.5 1,787.50 3 1.3049 1050 2,837.50 : Note that the long side of a futures contract gains (loses) from an increasing (declining) price of the underlying asset. Thus, Solution: $1,700 + [($1.3126 - $1.3140) + ($1.3133 - $1.3126) + ($1.3049 - $1.3133)] x EUR125,000 = $562.50, where EUR125,000 is the contract size of one EUR contract. With only $562.50 in your performance bond account, you would experience a margin call requesting that additional funds be added to your performance bond account to bring the balance
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HW 3 Solutions - Suggested Solution to HW 3 Problem 7.1(See...

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