Explanation:
Let's approach this step-by-step:
$110,000,000$50,000,000$65,000,000$110,000,000 - $65,000,000) = $45,000,000The total collateral required is $45,000,000. Since the hedge fund has already posted $50,000,000 in collateral, the posted collateral is greater than the required collateral. Therefore, no additional collateral is required. The extra collateral to be posted is $0.
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Q.5428 A hedge fund and a commercial bank counterparty have a one-way credit support appendix (CSA) on a transaction. The commercial bank's requirements for collateral are laid down below and are based on the transaction's mark-to-market value.
| Value ($) | |
|---|---|
| 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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