Question
The company futures is currently trading at 1,600. The ABC index pays dividends continuously at a rate proportional to its price. The dividend yield is
The company futures is currently trading at 1,600. The ABC index pays dividends continuously at a rate proportional to its price. The dividend yield is 2%.You enters into ten 3-month ABC long futures contracts. Each contract permits the de-livery of 250 units of the index. The initial margin is 10% of the notional value, and the maintenance margin is 75% of the initial margin. Peter earns the continuously compounded risk-free interest rate of 5% on his margin balance. The position is marked-to-market on a monthly basis. Find the range of values for the ABC index price 1 month from now which results in a margin call.
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