The P&Q futures is currently trading at 1,629. The P&Q index pays dividends continuously at a rate
Question:
The P&Q futures is currently trading at 1,629. The P&Q index pays dividends continuously at a rate proportional to its price. The dividend yield is 2%.
Today Peter enters into eight 3-month P&Q long futures contracts. Each contract permits the delivery of 250 units of the index. The initial margin is 10% of the notional value, and the maintenance margin is 70% of the initial margin. Peter earns the continuously compounded risk-free interest rate of 6% on his margin balance. The position is marked-to-market on a monthly basis.
Determine the range of values for the P&Q index price 1 month from now which results in a margin call.
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Related Book For
Question Posted: