Page 12 - FINAL CFA SLIDES DECEMBER 2018 DAY 13

Session Unit 13:
44. Market Structure & organisation

Maintenance margin requirement -a percentage % (typically 25% of the current position value

and below the Initial Margin Requirement) set to ensure that the margin loan is covered by the
value of the asset:
• If the % of equity in a margin account falls below the maintenance margin requirement, the

investor will receive a margin call, a request to augment back to the maintenance margin %
by depositing additional funds or depositing other un-margined securities.
• If the investor does not meet the margin call, the broker must sell the position.

tanties
The stock price which results in a margin call can be calculated by using the following formula:

Note that, any of this variables could be tested!

Example: Margin call price: If an investor
purchases a stock for $40 per share with an initial Meaning?
margin requirement of 50% and the maintenance
margin requirement is 25%, at what price will the
investor get a margin call?

Short sale is more profitable
When price falls but as the
price falls, there is bigger risk

that…