1. Gamma Airlines Professor André Farber Solvay Business School
Université Libre de Bruxelles

2. Data
On September 16, 2005, Julius Blue, oil analyst at Gamma Airlines (G), was reviewing the sweet crude oil futures position that had been initiated some weeks before.
Julius had decided to take a long position on sweet crude oil futures contracts traded on the NYMEX.
On August18, 2005, Julius bought 10 December 2005 futures contracts. The trading unit of one contract was 1,000 barrels (158,900 liters). The delivery point was Cushing, Oklahoma (but Julius’ intention was to sell the contracts before maturity). The margin requirements for one contract were:
Initial margin: $6,075
Maintenance margin: $4,500
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3. Profit / Loss Long: Short: Size of contract (1,000 bbl)
# contracts (10)
Short:
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4. P/L calculation – whole period
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5. Margin calls – using weekly data – 1 contract
Date F ∆F
Initial
deposit
P/L
Margin
account
Withdraw
Margin call
Th 18/8
64.79
Fr 19/8
66.63
1.84
6,075
1,840
7,915
Fr 26/8
67.42
0.79
790
6,865
Fr 2/9
68.10
0.68
680
6,755
Fr 9/9
65.41
-2.69
-2,690
3,385
2,690
Fr 16/9
63.91
-1.50
-1,500
4,575
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6. How many times did Gamma Airlines withdraw funds from the margin account? How much in total?

7. Assume that daily price changes are normally distributed :
Assuming that daily price changes are normally distributed with mean zero, what is the probability that an investor with a balance equal to the maintenance margin has a negative balance 2 days later (i.e. 1 day after a margin call) ?
Assume that daily price changes are normally distributed :
Using data in the case :
How to calculate the price change over a period of 2 days ?
If daily price changes are not correlated :
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8. N(x): review
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