An assessment of Mr. Chan’s investment portfolio reveals his position in an equity accumulator contract. The contract terms are as follows: he agrees to purchase 1,000 shares per day of a specific stock for 20 trading days at a strike price of HKD 100 per share. The contract has a knock-out barrier at HKD 120. The bank required an initial margin of 15% of the total notional contract value. After 5 trading days, during which the stock price never reached the knock-out barrier, the stock price falls to HKD 85. The bank recalculates its exposure and decides to issue a margin call. The bank’s policy is to ensure the client’s margin account covers the full mark-to-market loss on the remaining commitment plus the standard 15% initial margin on the remaining notional value. What is the precise amount of the margin call Mr. Chan will receive?
← Back · → / Enter Next · 1–4 or A–D Select an answer
