CHAPTER 2 Mechanics of Futures Markets
Drawback 2.eight. The social gathering with a brief place in a futures contract typically has choices as to the exact asset that can be delivered, the place supply will happen, when supply will happen, and so on. Do these choices enhance or lower the futures value? Clarify your reasoning. Drawback 2.9. What are an important features of the design of a brand new futures contract? Drawback 2.10. Clarify how margin shield traders in opposition to the opportunity of default. Drawback 2.11. A dealer buys two July futures contracts on frozen orange juice. Every contract is for the supply of 15,000 kilos. The present futures value is 160 cents per pound, the preliminary margin is $6,000 per contract, and the upkeep margin is $four,500 per contract. What value change would result in a margin name? Underneath what circumstances might $2,000 be withdrawn from the margin account? Drawback 2.12. Present that, if the futures value of a commodity is bigger than the spot value throughout the supply interval, then there is an arbitrage alternative. Does an arbitrage alternative exist if the futures value is lower than the spot value? Clarify your reply.