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An investor has short-short stock ABC and has to give them back in 4 month time. Against adverse evolution of ABC price this investor hedges
An investor has short-short stock ABC and has to give them back in 4 month time. | |
Against adverse evolution of ABC price this investor hedges his position with future contract based on ABC maturing in 4 month. | |
Contract size=10. Initial margin = 15% and maintenance margin = 75%. simple IR=2% | |
Time | Future price |
0 | 150 |
1 | 140 |
2 | 160 |
3 | 125 |
5 | 100 |
a) Determine the position, the initial margin and the maintenance margin. | |
b) Determine the movements in the outstanding balance. |
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