Test Exam 1 Question 76

[Anonymous]

the answer to question 76 (exam 1) states that when customers “net equity” is below maintenance margin, the daily variation margin call should bring the “net equity” upto maintenance margin (answer (a))

but the example in PRM handbook – chapter I.C.6 Futures Markets – states that the margin call should bring the “net equity” to initial margin level (in which case the answer would be (b)

which one is correct?

[Nitin Iyer]

Test Exam 1 Question 76

[Anonymous]

The question is “What is the margin call the fund manager faces in respect of daily variation margin“

which is indeed the maintenance margin. In respect of this margin, the margin call would be $1500. But you’re right that the real (total) margin call would be $2500 in order to reset the margin to its initial level.

[Anonymous]

ok understood. I should remember to read the question with a fine toothcomb.

thanks

[Author]

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