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FRM Part I · FRM Exam Part I · Exchanges and OTC Markets

A CCP requires an initial margin of USD 40,000 on a futures position held by a clearing member and a maintenance margin of USD 30,000. The position loses USD 12,500 on day 1, and the member makes no other deposits or withdrawals. On day 2 the position loses a further USD 4,000. Assuming margin account balances are marked daily, what variation margin call must the member meet at the end of day 2 to restore the account to the initial margin level?

With no deposits made, the margin balance falls from USD 40,000 to 27,500 after day 1 and to 23,500 after day 2. Restoring it to the initial margin of 40,000 requires a call of USD 16,500, not just the shortfall to maintenance margin.

  1. AUSD 16,500Correct
  2. BUSD 6,500
  3. CUSD 14,000
  4. DUSD 26,500

Explanation

After day 1 the balance is 40,000 − 12,500 = 27,500, which is below the 30,000 maintenance level, so a margin call to restore 40,000 would normally be 12,500 and is assumed to be met at the end of day 1. This question states no other deposits, so the member has not met it; the balance after day 2 is 27,500 − 4,000 = 23,500, and restoring to 40,000 requires 16,500. The option 6,500 only restores to maintenance (30,000 − 23,500), and 14,000 wrongly uses 30,000 less 16,000.

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