Markets: A Rigorous Course

M10 · Problem 26 ★ Check

A margin hike on an existing position

An account with equity ₹10,00,000 is long 5 SILVERM lots at ₹1,60,000/kg, under an initial margin of 10% of contract value. (a) Using (10.29), what adverse price move triggers a margin call if the margin rate stays at 10%? (b) The clearing corporation adds 7 points of margin (to 17%) with no price move. Is there a call? What is the new trigger move? (c) The price falls 5% and the margin rises to 17% on the same day. Compute equity, required margin and the cushion or shortfall. Repeat for 8 lots. (d) What is the largest notional the account can hold so that a 5% fall together with the hike to 17% produces no call? How many SILVERM lots is that?

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