Suppose that the intial margin requirement in a particular futures market is 4% of the futures price at the time the buyer/seller opens a futures position and that a margin call is issued whenever the amount in a margin account falls below 3% of the futures contract's price. The recipient of the margin call must then bring their margin account account back up to 4 % of the futures contract's price. SUppose further that buyer and seller intially contract for a future purchase/sale of the underlying asset@108,000 but 2 days later the price of the future contract has decreased to $105,000.
A) Does anyone receive a margin call? if so, whom and for how much?
B) What happens if the recipeient of a margin call cannot raise the requested funds to meet the margin call?