Question
Consider the Mark-to-Market Settlements for 1 gold futures contracts maturing in 5 months. Assume that the risk-free rate available to investors is 6% per annum
Consider the Mark-to-Market Settlements for 1 gold futures contracts maturing in 5 months. Assume that the risk-free rate available to investors is 6% per annum with quarterly compounding and that no arbitrage relationship between spot and futures prices (Futures-Spot parity) with continuous compounding holds in all months. Also assume that the initial margin is $18,000 per contract, while the maintenance margin is $6000 per contract
| Month | Spot Price End of Month(S) | Futures Price, End of Month (F) | Change in Futures Price | Contract Size (ounces) | Buyer/Long Position | Seller/Short Position | ||
| Contract Initiated | 0 | 1307.00 | 1339.84 | -- | 100 | (c)
| (c) | Initial Margin |
| 1 | 1309.00 | 1335.25 | (b) | 100 | (c)
| (c) | Monthly Adjustments | |
| 2 | (a)
| 1336.76 | (b) | 100 | (c)
| (c) | ||
| 3 | 1332.00 | 1345.29 | (b)
| 100 | (c)
| (c) | ||
| 4 | 1325.00 | (a)
| (b)
| 100 | (c) | (c) | ||
| Delivery | 5 | (a)
| 1321.00 | (b) | 100 | (c)
| (c) | |
| (c) | (c) | Account Bal. Month 5 |
For the questions below answers must contain at least three digits after the decimal point.
a. In the table above, show your answers in the cells marked by c
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Quantitative Financial Risk Management
Authors: Constantin Zopounidis, Emilios Galariotis
1st Edition
1118738187, 978-1118738184
