Consider an investment that is long 10 S&P 500 Index futures contracts at a price of $3,100.00. The initial margin requirement is $36,000 per contract and the maintenance margin is $30,000 per contract. The annual risk-free rate is zero. What is the notional value of your long exposure to the S&P 500 Index?

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10 June, 15:16

Consider an investment that is long 10 S&P 500 Index futures contracts at a price of $3,100.00. The initial margin requirement is $36,000 per contract and the maintenance margin is $30,000 per contract. The annual risk-free rate is zero. What is the notional value of your long exposure to the S&P 500 Index?

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Hamza Deleon · Answer 1

The notional value of your long exposure to the S&P 500 Index is $1,550,000

Explanation:

According to the given data The Investment considers purchasing 10 contracts at a price of 3100$.

The notional Value is the Total amount that we actually invest and also the amount we can actually lose in case the Value of S&P500 goes to 0.

A single contract of S&P500 is sold at 50 * (The index value/price at which it is purchased) ($3100 in this case)

So Notional Value per contract = $3100 * 50 = $155,000.

Therefore, since he has purchased 10 contracts, Total Notional Value = $155,000 * 10 = $1,550,000

The notional value of your long exposure to the S&P 500 Index is $1,550,000