Consider the following futures contract for the currency of Brazil, Brazilian real (BRL). Contract volume: 100,000 Brazilian reals Initial margin: $1000 Maintenance margin: $800 Day Settle price ($/BRL) 1 0.19 2 0.189 3 0.186 4 0.187 (a) Suppose trader C sells their futures contract to trader B on day 4. What is the profit/loss for all three traders? (Note: assume all trades occur at the settle price in the table).

Consider the following futures contract for the currency of Brazil, Brazilian real (BRL). Contract volume: 100,000 Brazilian reals Initial margin: $1000 Maintenance margin: $800 Day Settle price ($/BRL) 1 0.19 2 0.189 3 0.186 4 0.187 (a) Suppose trader C sells their futures contract to trader B on day 4. What is the profit/loss for all three traders? (Note: assume all trades occur at the settle price in the table).

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter7: International Arbitrage And Interest Rate Parity

Section: Chapter Questions

Problem 41QA

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Consider the following futures contract for the currency of Brazil, Brazilian real (BRL). Contract volume: 100,000 Brazilian reals Initial margin: $1000 Maintenance margin: $800 Day Settle price ($/BRL) 1 0.19 2 0.189 3 0.186 4 0.187 (Note: assume all trades occur at the settle price in the table). (a) Suppose trader A buys a futures contract from trader B on day 1. What is the balance on their margin accounts by the end of day 2? (d) Suppose trader A sells their futures contract to close out their position on day 2. Trader C buys this futures contract. What is the balance on all margin accounts at the end of day 3 for traders with an open position? Did anyone receive a margin call on day 3, and if so, for how much?
Consider the following futures contract for the currency of Brazil, Brazilian real (BRL). Contract volume: 100,000 Brazilian reals Initial margin: $1000 Maintenance margin: $800 Day Settle price ($/BRL) 1 0.19 2 0.189 3 0.186 4 0.187 (a) What’s an example of a hedger who might use this contract? (b) Assuming the USD has neither appreciated nor depreciated, has the Brazilian real appreciated or depreciated between days 1 and 4?
On Monday morning, a trader takes a long position in Australian dollars (AUD) future currency contract that matures on Thursday afternoon. The agreed upon price is USD76691/AUD for a currency lot of AUD100,000. A trader needs AUD 175,000. At the close of trading on Monday, the futures price falls to USD0.76620 = 1 AUD. At Tuesday close, the price further falls down to USD0.76602 = 1 AUD. At Wednesday close, the price rises to USD0.76658 = 1 AUD. At Thursday close, the price further rises to USD0.76698 = 1 AUD and the contract matures. The trader takes delivery of the AUD at the prevailing price of USD0.76698 = 1 AUD. What will be the trader’s profit (loss)? Gain of USD 7 Gain of USD 70 Loss of USD 7 Loss of USD 70
A futures trader goes for long position on two (2) CME Australian dollar contracts for AUD100,000 per contract. He purchases the currency futures on day 1 at US$0.7850. The margin required to initiate the trading is 5 percent of the contract value, while the maintenance margin is 80% of the initial margin. The settlement prices are US$0.7877 on day 1 and US$0.7860 on day 2. The prices move to US$0.7800 and US$0.7890 on day 3 and day 4 respectively. Then, the trader has decided to close the position on day 4. Calculate the daily marked-to-market transactions and the changes in the margin account. Determine net profit from the futures trading.
Suppose that the spot EUR in dollar exchange rate is EUR/USD = 1.0510-15. A trader bought a futures contract with a contract size of EUR 125,000, an initial margin of USD 2,600 and a maintenance margin of USD 2,400 at USD 1.0525 three days ago and had no gains or losses on the purchase day. The amount within the margin account will be cleared if no positions are taken. The settlement prices were USD 1.0512 and USD 1.0508 for the previous two trading days, respectively. The settlement price today is USD 1.0520. What is the amount within the margin account if this trader decides not to put any money aside for this margin account after purchase?
Today's settlement price on a Chicago Mercantile Exchange (CME) Yen futures contract is $0.8011/¥100. Your margin account currently has a balance of $2,000. The next three days' settlement prices are $0.8057/¥100, $0.7996/¥100, and $0.7997/¥100. (The contractual size of one CME Yen contract is ¥12,500,000). If you have a short position in one futures contract, the changes in the margin account from daily marking-to-market will result in the balance of the margin account after the third day to be
Using the quotations in Exhibit 7.3, note that the September 2016 Mexican peso futures contract has a price of $0.05481 per MXN. You believe the spot price in September will be $0.064 per MXN. Calculate your anticipated profits (or loss) measured in $ (keep one decimal), assuming you take a long position in three contracts (Note that the contract size of one MXN contract is MXN500,000 ). When you enter a positive number, it means a profit. If you enter a negative number, it means a loss. Additionally, please keep one decimal, eg., 1,500.4. There is no need to use currency symbol in this question since your balance is measured in US $.
Use the futures contract data in the following table to answer the question. Open High Low Settle Change Interest New Zealand dollar CME NZD 100,000; NZD/USD Sept 0.6043 0.6175 0.6025 0.6048 -0.0007 34,157 Dec 0.6128 0.6195 0.6105 0.6126 0.0004 1,569 A trader goes LONG three December NZD futures and the spot rate at maturity is 0.6138. What is the value of her position?
A currency speculator wants to speculate on the future movements of the €. The speculator expects the € to appreciate in the near future and decides to concentrate on the nearby contract. The broker requires a 2% Initial Margin (IM) and the Maintenance Margin (MM) is 75% of IM. Following € Futures quotes are currently available from the Chicago Mercantile Exchange (CME). Euro (CME) - €125,000; $/€ Open High Low Settle Change Open Interest June 1.2216 1.2276 1.2175 1.2259 -0.0018 255,420 Sept 1.2229 1.2288 1.2189 1.2269 - 0.0018 19,335 In addition to the information provided above, consider the following CME quotes that are available at the end of day one’s trading: Euro (CME) - €125,000; $/€ Open High Low Settle Change Open Interest June 1.2216 1.2276 1.2175 1.2176 -0.0083…
You purchase a futures contract in euros for $170,000. The trading unit is 125,000 euros. What is the ratio of cents to euros in this contract? (Divide the dollar con- tract size by the size of the trading unit.) Assume you are required to put up $4,000 in margin and the euro increases by 3¢ (per euro). What will be your return as a percentage of margin?
The Mexican peso futures contract is trading at 0.07713 $/MXN. Contract size for the Mexican peso future is 500,000 pesos. You believe the spot price will be 0.08365 $/MXN at expiration. What speculative position would you enter into to profit from your beliefs? Calculate your anticipated profits assuming you take a position in three contracts. What is the size of your profit or loss if the futures price is indeed an unbiased predictor of the future spot price and this price materializes? Do problem 1 again assuming you believe the spot price will be 0.07061 $/MXN.
(a) Suppose a trader takes a position on June 5th 2021, in one September 2021 EURO (EUR) future contract at USD1.3094/EUR. The trader holds the position until the last day of trading when the spot price is USD1.2939/EUR. This will be the final settlement price because of price convergence. The trader has EUR125,000 for this investment. (i) If the trader had a long position and he was a speculator, calculate his profit or loss for the position above. (ii) If the trader had a short position and he was a speculator, calculate his profit or loss for the position above. (iii) If the trader had a long position and he was a hedger, calculate his profit or loss for the position above. (iv) If the trader had a short position and he was a hedger, calculate his profit or loss for the position above. (b) Discuss factors that you would consider in evaluating the political risk associated before making FDI in a foreign country.