Question 3: The buyer and the seller of a future on Monday with an underlying value of 90,000 are both required to provide an initial margin of 10 per cent, assuming that counterparties have to keep all of the initial margin permanently as a buffer li.e. the maintenance margin will always be equal to the initial margin). MY MUM Question 3: required to provide an initial margin of 10 per cent, assuming that counterparties have to keep all of the initial margin permanently as a buffer li.e, the maintenance margin will always be equal to the initial margin). a. Calculate the variation margins and the accumulated profit/loss if the price of the underlying asset changes as presented in the table. (ie. Write your answers over the lines provided in the b) Calculate the return and the return for the holding period (Monday to Friday) for the seller of this future based on the above information. c) Explain what is meant by gearing returns with reference to this example. (Hint: gearing has the same meaning as leverage, note how the returns in the Imaginationum are amplified in the Monday 90,000 Tuesday 92,200 Wednesday 94,250 Thursday 90,300 Value of Future Friday 86,150 Buyer's Position Initial Margin Variation Margin Hccumulated Prolit VE- 0 0 Seller's Position Initial Margin Variation Margin Accumulated Profit 0 0 Question 3: The buyer and the seller of a future on Monday with an underlying value of 90,000 are both required to provide an initial margin of 10 per cent, assuming that counterparties have to keep all of the initial margin permanently as a buffer li.e. the maintenance margin will always be equal to the initial margin). MY MUM Question 3: required to provide an initial margin of 10 per cent, assuming that counterparties have to keep all of the initial margin permanently as a buffer li.e, the maintenance margin will always be equal to the initial margin). a. Calculate the variation margins and the accumulated profit/loss if the price of the underlying asset changes as presented in the table. (ie. Write your answers over the lines provided in the b) Calculate the return and the return for the holding period (Monday to Friday) for the seller of this future based on the above information. c) Explain what is meant by gearing returns with reference to this example. (Hint: gearing has the same meaning as leverage, note how the returns in the Imaginationum are amplified in the Monday 90,000 Tuesday 92,200 Wednesday 94,250 Thursday 90,300 Value of Future Friday 86,150 Buyer's Position Initial Margin Variation Margin Hccumulated Prolit VE- 0 0 Seller's Position Initial Margin Variation Margin Accumulated Profit 0 0
