In the process of going over exam FM material, I had two issues come up and was wondering if anyone had any insight.
1. Assuming you experience a margin call, is the convention on exam FM that you have to add enough cash to the margin account to reach the maintenance margin or the initial margin? From most or all of the reference text I've seen on the matter, it seems you need to reach the initial margin upon receiving a margin call. However, on #32 of SOA's DM problems, the answer was based off of only reaching the maintenance margin.
2. When calculating yield from a short sale, do the initial proceeds from selling the stock typically earn interest? For the sample problems I've worked I typically ignored interest on the short sale. From the following post, it looks as though the convention may have changed:
http://ift.tt/1J0PCi2
Thanks for any feedback on these two concepts.
1. Assuming you experience a margin call, is the convention on exam FM that you have to add enough cash to the margin account to reach the maintenance margin or the initial margin? From most or all of the reference text I've seen on the matter, it seems you need to reach the initial margin upon receiving a margin call. However, on #32 of SOA's DM problems, the answer was based off of only reaching the maintenance margin.
2. When calculating yield from a short sale, do the initial proceeds from selling the stock typically earn interest? For the sample problems I've worked I typically ignored interest on the short sale. From the following post, it looks as though the convention may have changed:
http://ift.tt/1J0PCi2
Thanks for any feedback on these two concepts.
Margin Calls and Short Sales
