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 (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?

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter8: Relationships Among Inflation, Interest Rates, And Exchange Rates

Section: Chapter Questions

Problem 42QA

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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 (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) 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?
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?
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.
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…
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 $.
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
Assume that you are running an Australia based company which has an account payable of EUR 125,000 due in three months. You decide to hedge out the associated foreign exchange risk using futures contracts. A futures contract of EUR125,000 is selling at A$1.5410 per euro. Suppose the next three days’ settlement prices are A$1.5399, A$1.5480, and A$1.5410. The initial margin of your performance bond account is $2,000 and maintenance margin is $1,500. What is your margin account balance at the end of the first day and what is the balance of this account at the end of the third day?
As a US exporter selling to Europe. You wish to hedge a 1,040,000 Euro to be received in 3 months with futures or forwards. Futures contract sizes for the Euro are 125,000E each. How many dollars will you receive/pay for the goods if you hedge with futures, forwards, and not hedging? Also, rank them? Now End Spot 1.100-01 $/E 1.300-01 $/E Futures 1.120 $/E 1.315 $/E Forwards 1.130-31 $/E
The following table shows the futures price data today for Commodity X, and you purchased a futures contract today at the settlement price. (Contract size : 30,000 kg of Commodity X) Open High Low Settlement Change Open Interest Today $16.28 $16.33 $16.25 $16.29 $(0.02) 6,338 Calculate the total value of this futures contract. If the initial and maintenance margin requirements are 15% and 10% of the contract value respectively, calculate the amount of deposit required to execute this contract. If the prices of the commodity X in the next 3 trading days are : $16.27, $16.40 and $16.97, calculate the profit/loss per kilogram of commodity X, total value of the contract, and the mark-to-market settlement. If additional margin is required, indicate when it is necessary and the additional deposit amount.
An FI is planning to hedge its one-year, 100 million Swiss franc (SF)-denominated loan against exchange rate risk. The current spot rate is $0.60/SF. A 1-year SF futures contract is currently trading at $0.58/SF. SF futures are sold in standardized units of SF125,000. Should the FI be worried about the SF appreciating or depreciating? Should it buy or sell futures to hedge against exchange rate risk exposure? How many futures contracts should it buy or sell if a regression of past spot exchange rates on changes in future exchange rates generates an estimated slope of 1.4? Show exactly how the FI is hedged if it repatriates its principal of SF100 million at year-end, the spot exchange rate of SF at year-end is $0.55/SF, and the forward exchange rate is $0.5443/SF.