AuthorTopic: margin call confusion
wawafish
@2009-03-16 09:22:38
Can someones please clarify the formula for me:

Formula for finding price for a margin call, short position: Price (1+maintenance margin) / (1 +/- initial margin)
deniska
@2009-03-18 16:57:53
The signs are reversed for short (+) vs. long (-) positions:

Long position: Original Price(1 - Initial Margin %)/1 - Maintenance Margin%

Short Position: Original Price(1 + Initial Margin %)/1 + Maintenance Margin%

Both equations imply a wider range of return distributions return based on the leverage factor you're allowed to borrow against: ( 1/initial margin% ) and thus, the leverage factor increases as equity decreases.

CFA Discussion Topic: margin call confusion

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