Suppose that a party want to enter into an FRA that expire in 42 days and is bases 137-day LIBOR. The dealer quotes a rate of 4.75% on this FRA. Assume that at expiration, the 137-day LIBOR is 4% and the nominal principal is $20,000,000. i) What is the term used to describe such nonstandard instruments? ii) Calculate the FRA payoff in a long position. (e) Assume that ABC Ltd expect to receive €20,000,000 in 90 days. A dealer provides a quote of $0.875 for a currency forward contract to expire in 90 days. Suppose that at the end of the 90 days, the rate if $0.90. Assume that settlement is in cash. Calculate the Cash flow at expiration.
A gold futures contract requires the long trader to buy 100troy ounces of gold. The initial margin requirement is $2,000, and the maintenance margin requirement is $1,500. i) Max goes long one June gold future contract at a future price of $320 per troy ounce. When could Max receive a maintenance margin call? ii) Chris sells one August gold future contract at a future price of $323 per troy ounce. When could Chris receive a maintenance margin call?(c) Peggy Smith is a futures trader. In early August, she took a short position in an S&P 500 Index futures contract expiring in September. After a week, she decides to close out her position. Describe how she would do so.(d) Consider a hypothetical futures contract in which the current price is $212. The initial margin requirement is $10, and the maintenance margin requirement is $8. You go long for 20 contracts and meet the margin calls but do not withdraw any excess margin.