Go tohttp://www.cmegroup.com/trading/fx/(Links to an external site.). Assume that today’s settlement...

Question

Go tohttp://www.cmegroup.com/trading/fx/(Links to an external site.). Assume that today’s settlement price on a CME EUR futures contract is the open price. Your performance bond account currently has a balance of $1700. The next three days settlement prices are +1%, +2% and -2% from today’s open price. Calculate the changes in the Performance bond account from daily marking to market and the balance of the performance bond account after the third day. Provide calculations where necessary to support your answer. Summarize your findings in a two page paper, not including title and references pages. Be sure to properly cite your resources using APA style.

The Week 2 Assignment

Must be two double-spaced pages in length, and formatted according to APA style as outlined in the Ashford Writing Center.
Must include a title page with the following:
- Title of paper
- Student’s name
- Course name and number
- - Instructor’s name
  - Date submitted
- Must begin with an introductory paragraph that has a succinct thesis statement.
- Must address the topic of the paper with critical thought.
- Must end with a conclusion that reaffirms your thesis.
- If you use references, you must document all sources in APA style, as outlined in the Ashford Writing Center.
- Must include a separate references page, formatted according to APA style as outlined in the Ashford Writing Center.

Kushal · Accepted Answer

Mark to Market settlements
Under mark to market settlement mechanism in futures market, the exchange ensures the counterparty risk is minimized due to daily settlements.1 Also, the initial and maintenance margins are used to ensure the risk is avoided otherwise the broker has the right to square off the contract. In this mechanism, everyday based on the daily gains or losses the settlement in the contract happens. For example, in a futures contract if the underlying price increase by 1%, then the party who is long in the contract receives 1% of the contract value on the same day. The short party pays that amount. Based on the margin requirements in the account, the respective party receives the margin calls and they have to ensure the amount is present in the account.

Go tohttp://www.cmegroup.com/trading/fx/(Links to an external site.). Assume that today’s settlement price on a CME EUR futures contract is the open price. Your performance bond account currently has...

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