Question

a portfolio manager desires to generate 10 million 100 days from now from a portfolio that is quite similar in composition to NSE 25 share index. she requests a quote on a short position in a 100 days forward contract based on the index with a notional amount of 10 million and gets a quote of 525.2. if the index level at the settlement date is 535.70. Required: calculate the amount the manager will pay or receive to settle the contract

Answer 1

In the instant case investor has taken a short position.This position arise when investor sell share/stock without holding it
and repurchase these shares when price become lower.
Details		Short position has taken at position	Position at settlement date	change
Quote	$	525.20	535.7	10.5	Higher
Change in %	=	10.5/525
	=	2.00
Notional amount		10 million
As price increases investor now required to pay to hold long position.
Payment requirement		= Notional amount X change in higher side
	i.e	10000000*2.0%
	=	200000