Thanks for your comprehensive reply David, very clear.
To be sure though; I think the option value should not be able to go below zero, should it?
Whereas a 50m long equity position funded by 50m common debt could, correct?
Thanks again!
Hi @David Harper CFA FRM ,
I do get the idea of the economic exposure not being equal to the accounting book value exposure.
But I think I am joining the initial question in the thread of how we go from the mentioned call option on 100m S&P, to a broker loan of 50m as a liability (what is a...
Hi there,
I am puzzled with the graph below; isn't the independent amount posted as collateral, either way, whatever happens?
Does the margin period of risk then still have an impact?
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