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  3. question 3 (total:25 marks) the ftse bursa malaysi

Question 3 (Total:25 marks) The FTSE Bursa Malaysia KLCI Futures (FKLI) 3-month contract is as...

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Question 3 (Total:25 marks) The FTSE Bursa Malaysia KLCI Futures (FKLI) 3-month contract is as follow: KLCI Index: FKLI Futures 3-month contract price: Contract Size: Initial margin requirement: Maintenance margin requirement: 1,560 1,615 MYR 50 multiplier 25% 22% Required: (a) Jane decides to take a long position in the FKLI futures 3-month contract. One month later, if the KLCI index decreases to 1,490 that has led to a decline in the 3-month FKLI to 1,545, would she get a margin call? If yes, how much does she have to top up in order to maintain the position? (10 marks) (b) Discuss how an arbitrage opportunity related the KLCI index can be identified using FKLI. If the fair value of FKLI is estimated to be 1,580, design a strategy to take advantage of the arbitrage opportunity. (15 marks)

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