Question 2. Suppose now you are at the end of July 2019 and want to hedge the risk of your portfolio up until the end of October 2019 (for approximately three months) with the equity index futures you picked in Question 1. In this question, you need to compute the varying margin balance of your futures position throughout the three-month period. For the S-index futures, the maintenance margin is $6000 and the initial margin is $6600. For the N-index futures, the maintenance margin is $7600, and the initial margin is $8360. a) In the Excel file, you are given both futures contracts' price series from Aug 1, 2019 to Oct 31, 2019. Suppose you long/short one futures contract that you decided to use in Question 1 (whether you take a long or short position depends on your answer in Q1). Compute the following quantities (for simplicity, omit the interest you eam in your margin account): i. Daily Gain or Loss: the daily change in the futures price to be reflected on your account ii. Account Balance: the margin balance after adjusting for the daily gain and loss iii. Margin Deposit the amount of new deposit required to meet the margin requirement iii. New Account Balance: the amount in your margin account after placing the margin deposit iv. Total Deposit: the total amount of capital you use to keep the position open (suppose you never withdraw money from the margin account) v. Cumulative Profit or Loss Question 2. Suppose now you are at the end of July 2019 and want to hedge the risk of your portfolio up until the end of October 2019 (for approximately three months) with the equity index futures you picked in Question 1. In this question, you need to compute the varying margin balance of your futures position throughout the three-month period. For the S-index futures, the maintenance margin is $6000 and the initial margin is $6600. For the N-index futures, the maintenance margin is $7600, and the initial margin is $8360. a) In the Excel file, you are given both futures contracts' price series from Aug 1, 2019 to Oct 31, 2019. Suppose you long/short one futures contract that you decided to use in Question 1 (whether you take a long or short position depends on your answer in Q1). Compute the following quantities (for simplicity, omit the interest you eam in your margin account): i. Daily Gain or Loss: the daily change in the futures price to be reflected on your account ii. Account Balance: the margin balance after adjusting for the daily gain and loss iii. Margin Deposit the amount of new deposit required to meet the margin requirement iii. New Account Balance: the amount in your margin account after placing the margin deposit iv. Total Deposit: the total amount of capital you use to keep the position open (suppose you never withdraw money from the margin account) v. Cumulative Profit or Loss
