Question
4a) Explain the use of the so-called maintenance margin and how it is different from variation margin. [10 marks] b) You contact your broker on
4a) Explain the use of the so-called maintenance margin and how it is different from variation margin. [10 marks]
b) You contact your broker on March, 19th to go short on ten gold futures on the NY Commodity Exchange for September delivery. The futures price is $200/oz. Assume the standard contract size is 75 oz. The broker requests initial funds to be deposited: $3000/contract. Suppose by the end of March, 19th, the futures price drops to $150/oz. Please compute the total gain/loss and explain what the exchange will do to your account. [10 marks]
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