Chapter 18: Managing Credit Risk: Margin, OTC Markets, and CCPs
18.16.
A company enters into a short futures contract to sell 5,000 bushels of wheat for 250 cents per
bushel. The initial margin is $3,000 and the maintenance margin is $2,000. What price change
would lead to a margin call? Under what circumstances could $1,500 be withdrawn from the
margin account?
There is a margin call when more than $1,000 is lost from the margin account. This happens
when the futures price of wheat rises by more than 1,000/5,000 = 0.20. There is a margin call
18.17.
A trader buys 200 shares of a stock on margin. The price of the stock is $20. The initial margin is
60% and the maintenance margin is 30%. How much money does the trader have to provide
initially? For what share price is there a margin call?
The trader has to provide 60% of the price of the stock or $2,400. There is a margin call when
the margin account balance as a percent of the value of the shares falls below 30%. When the
or
or
18.18.
In Figure 18.3 where the CCP is used, suppose that an extra transaction between A and C which
is worth 140 to A is cleared bilaterally. What effect does this have on the tables in Figure 18.3?
In the case of the first table where all transactions are cleared bilaterally the exposures of A, B,
Dealer Exposure after netting incl
CCP
Exposure after netting excl
CCP
A 170 50