
Explanation:
Let's approach this step-by-step:
$87,000,000$50,000,000New net exposure: $110,000,000
New additional collateral required = max(0, Net exposure - Threshold - Collateral posted)
= max(0, 110,000,000 - 65,000,000 - 50,000,000) = $-5,000,000
The difference in collateral required:
-5,000,000
Round to the nearest rounding amount ($10,000):
10`,000 = $-5,000,000
Check if this exceeds the minimum transfer amount:
5,000,000, which is less than the minimum transfer amount of $12`,000,000
Therefore, despite the increase in net exposure, no additional collateral will be required from the hedge fund because the calculated amount doesn't meet the minimum transfer amount.
Ultimate access to all questions.
| Value ($) | |
|---|---|
| Market-to-value of net exposure | 87,000,000 |
| Market-to-value of collateral posted | 50,000,000 |
| Threshold amount | 65,000,000 |
| Minimum transfer amount | 12,000,000 |
| Rounding amount | 10,000 |
How much extra collateral will the hedge fund be required to post if the net exposure rises to $110,000,000 and the mark-to-market value of the posted collateral remains unchanged?
A
$17,000,000
B
$0
C
$33,000,000
D
$40,000,000
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