1. The British pound futures contract traded on the Chicago Mercantile Exchange (CME) has the following contract specifications:

Underlying Amount: GBP 62,500

Contract Value: Underlying Amount x Contract Price

Minimum Price Increment: $.0001 per GBP (= $6.25)

On 4/11/22, the June '22 GBP contract settled at $1.3030/GBP.

1. Using the Internet or a similar source, locate the initial margin requirement for this June '22 GBP contract. What percentage of the 4/11/22 value of the contract is that initial margin?

1. Futures contracts are marked-to-market daily, and margin accounts are adjusted accordingly on a daily basis. Thus, the initial margin is based upon a daily volatility input. If one assumes the initial margin as a percentage of the June '22 contract is designed to cover a two standard deviation move in the GBP versus the U.S. dollar and there are 256 business days in a year, what is the annualized volatility rate being used to arrive at this initial margin value?