The document provides an overview of risk management with futures contracts, explaining key concepts like hedging, short and long positions, forwards versus futures, margins, mark-to-market process, and how taking opposite positions in the cash and futures markets can help reduce risk for buyers and sellers. Futures contracts standardize terms to allow for trading on exchanges, use a clearing house to minimize counterparty risk, require daily margin payments to settle profits and losses, and can be closed out before expiration.

1. Risk management with futures-Overview
• Cash/Spot market.
• What is hedging?
• Short hedge and Long hedge.
• What is a forward contract?
• What are financial futures?
• How do futures differ from forwards?
• Clearing house and margins.
• How do margins work?
• How do futures contracts work to reduce risk?
• What is closing out?
• Example of a futures contract.

2. Cash/spot Market
• The underlying currency, money or capital
market in which transactions for the purchase
and sale of cash instruments to which futures
contracts relate are carried out.
• Also known as spot market.(example. Stock
market, forex market, interest rates).
• If there is no cash market(underlying) ,there
cannot be a derivatives market.
• Contrast with forward/futures market.

3. What is Hedging?
• A technique used by individual investors, producers
and consumers of commodities, and financial
institutions to protect their interests from severe
price fluctuations.
• Goal of hedgers is to ‘’lock in’’ or guarantee an
approximate future price for the sale or purchase of
their product in order to eliminate or minimize the
risk of price fluctuations.
• Hedging is possible because futures prices fluctuate
with the underlying cash markets. For example when
corn prices on the open market move higher or
lower so do the futures prices.
• The cash and futures market do not always move in
the same magnitude (not parallel)-Basis risk.

4. Short hedge and Long hedge
• Hedges come in two basic forms: the short and the long.
• Short hedge is also called a selling hedge. A long hedge is
also called a buying hedge.
• A short hedge protects a person who owns/will own an
asset (shares, commodities, currency) and expects to sell
it in the future. He is concerned that the price will fall.
Example – a producer of crude oil. Exporter who is yet to
receive the foreign currency proceeds
• A long hedge is used by a person who wants to buy an
asset in the future and is concerned that the price will
rise. Example- a jeweler wants to buy gold.

5. Short Vs. Long
Position
Cash Market Long Short
(Owns)
Forward/Futures Market
(Hedge) Short Long
(Sell ) (Buy)
(Does not own but
wants to Own)

6. What is a forward contract?
• A forward contract always involves a contract
initiated or entered at one time (maybe today)
• To be performed in accordance with the terms of
the contract at a subsequent time. (future/later)
• Always involves an exchange of one asset for
another.
• The price at which the exchange occurs in the
future is set at the of the initial contract.
• Actual payment and delivery of the good occurs
later.
• Mumbai- Pune travel by Airline, rail , taxi with
fare decided in advance.

7. Forward contract-Example
• Having heard that a highly prized St. Bernard has
just given birth to a litter of pups, a dog lover
rushes to the kennel to see the pups.
• After inspecting the pedigree of the parents, the
dog lover offers to buy a pup from the breeder.
• The exchange however , cannot be completed at
this time since the pup is too young to be
weaned.
• The dog lover and the breeder agree that the
pup will be delivered in 6 weeks, and the dog
lover will pay Rs. 4000 in six weeks upon delivery
of the pup.

8. Forward contract-example
• A foreign currency forward contract calls for the
exchange of some quantity of foreign currency at
a future date in exchange for a payment at that
later date.
• At the time of contracting , the forward contract
stipulates the price to be paid at the time of
delivery of the good.

9. Forward is a zero-sum game
• In a forward contract where the sole objective of
each party (buyer/seller) is to lock in a price for a
future neither party wants to pay any more than
the other.

10. Forwards and obligation
• A distinguishing characteristic of the forward is
its bestowal of obligation.
• No matter what the spot price of the underlier,
come delivery date, the long party must buy and
the short party sell. Even if it hurts.
• If the market moves against them, the losing
party in a forward deal, long or short can also
default.-Default Risk.
• If we want to avoid the default risk, inherent in a
forward contract, we can use a futures contract
instead, but will have to give up some flexibility.

11. What are financial futures?
• Financial future , like forwards are contracts that
help to ‘lock in’ the price at which one wishes to
buy or sell an asset in the future, to protect
against price changes.
• Variation of a forward contract , but with some
essential differences.

12. What is a futures contract?
• A type of forward contract with standardized and
specified contract terms, traded on an exchange .
• As in forward contracts, a futures contract calls
for the exchange of some goods at a future date
for cash, with the price decided on the contract
date.
• Payment for the goods is at a future date.
• The purchase of a futures contract undertakes to
receive delivery and pay for it .
• The seller of a futures contract promises to
deliver the goods and receive payment.

13. Essence of a futures contract
• A futures contract fixes the price and conditions
• NOW
• For a transaction that will take place in the
• FUTURE

14. How do futures contracts differ from forward contracts.
1. Futures contracts always trade on an organized exchange. Not
OTC.(Anonymous counterparties, matching by exchange,
liquidity)
2. Futures contracts are s predefined highly standardized with a
specified quantity of a good, specified price, delivery date and
delivery mechanism. No flexibility.
3. Performance of a futures contract is guaranteed by a futures
exchange/clearing house- a financial institution associated
with the futures exchange.(Credit/default risk minimized –
How?)
4. All futures contracts require that traders post margin in order
to trade. MTM / daily settlement. Profits credited and losses
charged on daily basis. No accumulation.
5. Ability to engage in offsetting transactions. Forward contracts
are generally held to expiration and settled by actual delivery.
6. Futures markets are regulated by government agencies
(SEBI).

15. Comparison of Futures and Forward Contracts

16. Closing Out.
• Majority of Futures contracts are closed out
before they mature.
• Closing out involves taking a futures position
opposite to the original position.
• When Futures contracts are closed out, the
transactor is left with no futures position. The
purchase and sales cancel each other.
• To make a profit you need to:
Buy a contract low and close out high or
Sell a contact high and close out low.

17. What is a 'Cash Settlement’ ?
• A settlement method used in futures and options
contracts where, upon expiration or exercise, the
seller of the financial instrument does not deliver
the actual underlying asset but instead transfers
the associated cash position.

18. 2daysbefore expiry 1daybefore expiry
(futuresprice =50) (futuresprice =52) (futuresprice =53)
Expiry
Three formsof delivery-CloseoutversusPhysical DeliveryversusCashSettlement.
Closeout:
Pay52,receive assetworth53
Physical Delivery
or
Marktomarketprofit/loss:
53-52=1
Sell contractat53
Buyfuturesat50
Paynothing
MarktoMarket
profit/loss:
52-50=2
CashSettlement
Receive 53-52=1
or

19. Goods
Funds
Funds
Funds
CH
Buyer Seller
Obligations without a clearing house
Obligations with a clearing house
Buyer Seller
Goods Goods

20. Clearing House and margins
• All default risk is taken is taken by the clearing
house.
• Clearing house protects itself from counterparty
default risk by means of variation and
maintenance margins.
• An important implication of the margin system is
the removal (or substantial reduction) of
counterparty risk.
• Margin payments are used to gradually settle
profits and losses of the contract and also as
collateral against default.

21. What is margin?
• Margin-The cash balance or security deposit
required from a futures or options trader.
• Initial Margin-The cash required from a futures
trade when entering into the trade.
• Maintenance Margin-The minimum margin a
trader must keep on deposit at all times.
• Margin call-A request for extra margin when the
balance in the margin account equals or falls
below maintenance level
• Variation Margin-An extra margin required to
bring the balance in a margin account up to the
initial margin, when there is a margin call.

22. Assumptions:
Opening Futures price 100 per contract
Initial margin 5 per contract
Maintenance margin 3 per contract
No of contracts 10
Day
0 100.00
1 99.20
2 96.00
3 101.00
4 103.50
5 103.00
6 104.00
The following example provides an example of the mark to market
process that occurs over a period of 6 trading days.
How do Mark to Market (MTM) and Margins work?
Although a trader can withdraw any funds in excess of the initial margin ,
we shall assume he does not do so. Complete the following table for both
the long and short positions. Assume that on the day the contract is
purchased there is no MTM profit or loss,
Funds
Deposited
Beginning
Balance
Futures
Price
Price
Change
Gain/
Loss
Ending
Balance

23. Initial margin 50 (5X 10)
Maintenance margin 30 (3X 10)
Day
0 0 50 100.00 0 0 50
1 50 0 99.20 -0.80 -8 42
2 42 0 96.00 -3.20 -32 10
3 10 40 101.00 5.00 50 100
4 100 0 103.50 2.50 25 125
5 125 0 103.00 -0.50 -5 120
6 120 0 104.00 1.00 10 130
Profit/Loss?
A:Holderof LongPosition of 10contracts.
Ending
Balance
Beginning
Balance
Funds
Deposited
Futures
Price
Price
Change
Gain/
Loss

24. Initial margin 50 (5X 10)
Maintenance margin 30 (3X 10)
Day
0 0 50 100.00 0 0 50
1 50 0 99.20 -0.80 8 58
2 58 0 96.00 -3.20 32 90
3 90 0 101.00 5.00 -50 40
4 40 0 103.50 2.50 -25 15
5 15 35 103.00 -0.50 5 55
6 55 0 104.00 1.00 -10 45
Profit/Loss?
Ending
Balance
B:Holderof Short Position of 10contracts.
Beginning
Balance
Funds
Deposited
Futures
Price
Price
Change
Gain/
Loss

25. • Symmetrical zero sum game.

26. Margins and cash flow risk
• Because the clearinghouse acts as counterparty
and gains/losses from every position are settled
daily the counterparty credit risk is minimized.
• However, since the party losing money in the
futures trade needs to settle his losses every
time, this could cause a serious cash flow risk (i.e.
a significant negative cash flow) if the losses
accumulate and the exchange keeps requiring
cash settlements to cover the losses.
• MG.

27. A gold futures contract requires the long trader to
buy 100 troy ounces of gold. The initial margin
requirement is $2000 and the maintenance margin
requirement is $1500.
a) X goes long one June gold futures contract at a
futures price of $320 per troy ounce. When
would X receive a maintenance margin call?
b) Y sells one August gold futures contract at a
futures price of $ 323 per ounce. When would Y
receive a maintenance margin call?

28. • A copper futures contract requires the long
trader to buy 25000 lbs of copper.
• A trader buys one November copper futures
contract at a price of $0.75/lb. Theoretically,
what is the maximum loss this trader could have?
• Another trader sells one November copper
futures contract. Theoretically, what is the
maximum loss, this trader with a short position
could have?

29. Consider the following hypothetical futures contract.
Assumptions:
Opening Futures price 212 per contract
Initial margin 10 per contract
Maintenance margin 8 per contract
No of contracts 20
Day
0 212.00
1 211.00
2 214.00
3 209.00
4 210.00
5 204.00
6 202.00
Ending
Balance
Although a trader can withdraw any funds in excess of the initial margin ,
we shall assume he does not do so. Complete the following table for the
long position. Assume that on the day the contract is purchased there is
no MTM profit or loss.(a)When would there be a margin call? (b)How
much are the total gains or losses by the end of day 6?
Beginning
Balance
Funds
Deposited
Futures
Price
Price
Change
Gain/
Loss

30. Initial margin 200 (20 X 10)
Maintenance margin 160 (20 X 8)
Day
0 0 200 212.00 0 0 200
1 200 0 211.00 -1.00 -20 180
2 180 0 214.00 3.00 60 240
3 240 0 209.00 -5.00 -100 140
4 140 60 210.00 1.00 20 220
5 220 0 204.00 -6.00 -120 100
6 100 100 202.00 -2.00 -40 160
a)The difference between the initial margin requirement and the
maintenance margin requirement is 2. Because the initial futures price is
212,a margin call would be triggered if the price falls below 210.
b)By the end of day 6, the price is 202, a decrease of 10, from the purchase
price of 212. The loss is 10 per contract. For 20 contracts the loss is 200.
The loss can also be calculated as follows. The initial deposit was 200
followed by margin calls of 60 and 100, making a total deposit of 360 so far
and no withdrawal of excess margin.The ending balance is only 160.Thus the
total loss incurred is 360-160=200.
A:Holder of Long Position of 20 contracts.
Beginning
Balance
Funds
Deposited
Futures
Price
Price
Change
Gain/
Loss
Ending
Balance

31. • What about Short Position?

32. Initial margin 200 (20 X 10)
Maintenance margin 160 (20 X 8)
Day
0 0 200 212.00 0 0 200
1 200 0 211.00 -1.00 20 220
2 220 0 214.00 3.00 -60 160
3 160 40 209.00 -5.00 100 300
4 300 0 210.00 1.00 -20 280
5 280 0 204.00 -6.00 120 400
6 400 0 202.00 -2.00 40 440
The profit can also be calculated as follows. The initial deposit was 200
followed by a margin call of 40, making a total deposit of 240 so far and no
withdrawal of excess margin.The ending balance is 440.Thus the total profit
is 440-240=200.
a)The difference between the initial margin requirement and the
maintenance margin requirement is 2. Because the initial futures price is
212,a margin call would be triggered if the price rises above 214.
b)By the end of day 6, the price is 202, a decrease of 10, from the sale price
of 212. The profit is 10 per contract. For 20 contracts the profit is 200.
B:Holder of Short Position of 20 contracts.
Beginning
Balance
Funds
Deposited
Futures
Price
Price
Change
Gain/
Loss
Ending
Balance

33. How do futures contracts work to reduce risk
1. Management of risk using futures is based on
the principle that spot (cash) prices and futures
prices tend to move up or down together, more
or less in tandem.
2. By taking opposite positions in the underlying
assets market and futures market the price risk
is mitigated.
3. Opposite positions in the two markets allow
losses in one to be offset by gains in the other.

34. Using futures to hedge positions in terms of buyers and sellers
In Cash Market In Futures Market Resulting Hedge
In Cash Market In Futures Market Resulting Hedge
Sellers
are long because
they hold the
commodity.
need to be short
or sell futures
contracts.
The positions are opposite
so it protects the seller in
the cash market. Any loss in
the cash market due to the
price going down, is offset
by profit in the futures
Buyers
are short
because they
need to buy the
need to go long or
buy futures
contracts.
The positions are opposite
so it protects the buyer in
the cash market. Any loss in
the cash market due to the
price going up, is offset by
profit in the futures

35. Short or seller’s hedge using futures
Potential receipt = $ 3,350,000
What happens if at the end of Sept., the cash price of wheat falls to $ 3.00/ bushel?
Cash (Price = $ 3.30/bushel on April 1st) Futures(Price = $ 3.35/bushel on April 1st)
A wheat farmer is long in the cash market and needs to be short in the futures market
to hedge his wheat production. In this case he sells CBOT futures contracts. Each futures
contract is for 5000 bushels of wheat.
Outcome: The total income is 3,000,000 + 3,30,000 = $ 3,330,000. The farmer has
achieved a price of $ 3.33 per bushel which is 3 cents more than the April price.
Cash (Price = $ 3.00/bushel on Sept. 30th) Futures (Price = $ 3.02/bushel on Sept. 30th)
The farmer sells 1 million bushels of wheat
at $ 3.00/ bushel. Income = $ 3,000,000.
The farmer buys back the 200 contracts at $
3.02/ bushel at a cost of $ 3,020,000.Since
the contracts were sold for $ 3,350,000 the
profit is $ 330,000.
On April 1st the price of wheat in the cash
market is $ 3.30/bushel. The farmer plants
enough wheat to produce 1 million
bushels for sale at the end of September.
On April 1st the farmer sells 200 September
futures contracts, at $ 3.35 / bushel.
Potential income = $ 3,300,000 if prices
remain stable.

36. Short or seller’s hedge using futures
What happens if at the end of Sept., the cash price of wheat rises to $3.50/ bushel?
The farmer could let the contracts mature but in practice, this is most unlikely .
The following equation can be used to calculate the net price for a hedge.
3.00+ 0.33= 3.33
3.50- 0.20= 3.30
For Price fall
For Price Rise
The farmer sells 1million bushels of wheat
at $3.50/ bushel. Income = $3,500,000.
The farmer buys back the 200contracts at $
3.55/ bushel at a cost of $3,550,000.Since
the contracts were sold for $3,350,000the
loss is $200,000.
Outcome: The total income is 3,500,000- 200,000= $3,300,000. The farmer has achieved
a price of $3.30per bushel which is the expected April price.
There is no such thing as a perfect hedge , but hedging does work to offset any major
losses as this example shows.
Net price/received = Cash price +/- Futures gain/loss.
Cash (Price = $3.50/bushel on Sept. 30th) Futures (Price = $3.55/bushel on Sept. 30th)

37. Long or buyers hedge
Potential payment = $ 31,250.. Potential payment = $ 37,500
On May 1st the price of copper in the cash
market is $ 1.25/lb. The producer needs to
buy 25000 lbs of copper for August cable
production.
On 1st May, a German copper cable producer has received an order to produce a reel of
cable in August. The producer stands to make a healthy profit at the current cash
prices,but he does not have sufficient warehouse capacity to buy and store the metal
now. the producer also fears that the price of copper will rise soon due to labour
disputes at the smelters.The producer is short in the cash market, so needs to be long in
the futures market to protect his position.
Cash (Price = $ 1.25/lb on May 1st) Futures(Price = $ 1.50/lb on May 1st)
On May 1st the producer buys a COMEX
High Grade copper futures contracts, for
25000lbs of metal at a cost of $ 1.50/ lb.
Cost incurred = $ 51,250.. Payment received = $ 56,250.
Outcome: The difference between the cash cost incurred and potential cost represents
a loss of51250 - 31250 = $ 20000. This is offset by a profit from the futures hedge of 56250-
37500 = $18750. By hedging, the producer has only made a loss of 20000-18750 = $ 1250.
The net price paid = 205 - 75 (future gain ) = 1.30/lb.
Over the next 3 months, there is a strike and the output from the US smelters declines.
The price of copper rises sharply.
Cash (Price = $ 2.05/lb on August 1st) Futures(Price = $ 2.25/lb on August 1st)
On August 1st the producer buys 25000 lbs
of copper and takes delivery at $ 2.05/lb.
On August 1st the producer sells his
futures contracts, which now stand at $
2.25/ lb. The profit on the futures is
therefore 2.25 - 1.50 = $ 0.75/lb.

38. Open interest and Trading volume
• Trading volume-the total number of contracts
traded.
• Open interest-the total number of all outstanding
contracts, (long or short).
• Trading volume-measure of the market’s liquidity,
more the volume, the more active the market.
• Open interest is a measure of the market’s
outstanding demand or exposure to a particular
commodity at the delivery date.

39. • A July gold futures is eligible for trading. Heather buys twenty of
those contracts from Kyle.
• Heather reduces her exposure. She sells ten contracts to Tate.
• Kyle reduces his short position .Buys five contracts from Heather.
Trading Volume versus Open Interest

40. Strip & Stack

41. How are futures traded?
• Traded in lots of the underlying share.
• Lot size is fixed by the exchange on which it is
traded and differs from stock to stock. Minimum
value Rs. 2 lakhs.
• Example- lot size of Nifty is 75 (it can be bought
only in multiples of 75). ACC 400. Asian paints
600.
• If Nifty futures are trading at 8000, the value of
one lot of Nifty futures would be Rs. 6 lakhs.
• Initial margin could be 15-20% of total value.

42. What is the duration of a futures contract?
• Futures contracts are available in durations of 1 month (near
month), 2 months (middle month) and 3 months (far month).
• Monthly contracts expire on the last Thursday of every month. If
it happens to be a trading holiday it expires on the previous
trading day
• Once the earliest contract (near month) expires another contract
(far month) is introduced on the very next day. Last Friday is the
start of the new contract.
• For example on January 22,2018 there were three month
contracts i.e. Contracts expiring on January 25, 2018, February 22,
2018 and March 29, 2018.
• On expiration date i.e January 25,2018, new contracts having
maturity of April 26,2018 were introduced for trading.
• Name of contract is known by expiry month not starting month.
Near month contracts are more liquid.
• Not unlike a train with 3 carriages.

43. Nifty 50 futures as at close of 14/6/18 on NSE.
Instrument Expiry Previous Open High Low Last Volume Turnover Underlying
Type Underlying Date Close Price Price Price Price Contracts Lakhs Value
Index Futures Nifty 28-06-2018 10845 10823 10834 10771 10814 101496 822321 10808
Index Futures Nifty 26-07-2018 10856 10820 10844 10785 10825 4554 36933 10808
Index Futures Nifty 30-08-2018 10877 10864 10865 10808 10849 631 5127 10808
AnyObservations?

44. How does a futures contract work
Suppose two firms want to hedge their risk about
future price of gold
• A gold mine produces 100 ounces of gold in one
year which it wants to sell after one year. It is
worried about price of gold declining below its
cost of production.
• A Jeweler wants to buy 100 ounces of gold after
one year. It is worried that cost of raw material
(gold) will rise.
What can they do to protect themselves from the
risks they face?

45. How does a futures contract work(contd.)
• The gold mine and the jeweler could enter into a
forward contract directly with each other. But can
they trust each other? Each will find it difficult to
assess the credit risk of the other.
• One possible solution is for both to buy/sell gold
futures contracts on the Exchange. For this they
have to open future accounts and post a security
deposit which is referred to as ‘’Margin’’.

46. 1 Price of Gold Futures 2100 USD per Troy ounce
2 Contract Size 100 ounces
3 Contract value, expiry 1 yr 210000 USD
4 Margin requirement 5% Each from Buyer and seller
5 Initial Margin 10500 USD each from Buyer and seller
6 Seller is a Miner worried about fall in price after 1 year. What will he do? Sell
7 Buyer is a Jeweller worried about rise in price after 1 year. What will he do?Buy
8 Let us assume seller will produce 100 ounces and buyer will buy 100 ounces.
9
10 Sellers Buyers Total Margin
11 Price(USD) Margin Margin
12 At inception 2100 10500 10500 21000
13 End of Day 1 2105 10000 11000 21000
14 End of Day 2 2111 9400 11600 21000
15 End of Day 3 2121 8400 12600 21000
16 End of Day 4 2145 6000 15000 21000
17 End of Day 5 2100 10500 10500 21000
18
19 End of Day 361 2070 13500 7500 21000
20 End of Day 362 2060 14500 6500 21000
21 End of Day 363 2065 14000 7000 21000
22 End of Day 364 2055 15000 6000 21000
23 End of Day 365 2050 15500 5500 21000
24 Profit/(loss) 5000 (5000)
25
26
27
MARGIN ACCOUNT
On day 365, being the last day of trading both parties must
close out(reverse their original positions) or go through the
delivery process.

47. 9
10 Sellers Buyers Total Margin
11 Price(USD) Margin Margin
12 At inception 2100 10500 10500 21000
13 End of Day 1 2105 10000 11000 21000
14 End of Day 2 2111 9400 11600 21000
15 End of Day 3 2121 8400 12600 21000
16 End of Day 4 2145 6000 15000 21000
17 End of Day 5 2100 10500 10500 21000
18
19 End of Day 361 2070 13500 7500 21000
20 End of Day 362 2060 14500 6500 21000
21 End of Day 363 2065 14000 7000 21000
22 End of Day 364 2055 15000 6000 21000
23 End of Day 365 2050 15500 5500 21000
24 Profit/(loss) 5000 (5000)
25
26
27
28
29
30 Seller Buyer
31 Profit on Futures contract 5000 (5000)
32 Actual sale/(Purchase) 205000 (205000)
33 Final Cash flow 210000 (210000)
MARGIN ACCOUNT
On day 365, being the last day of trading both parties must
close out(reverse their original positions) or go through the
delivery process.
Position on Closing out

48. An investor is long 2 contracts of Nifty futures at Rs.
5035 each. The next morning a scam is disclosed of
a large company, because of which markets sell off
and Nifty falls to Rs. 4855. What is the mark to
market for the investor? Nifty contract is 50 lot size.
a) (-) 18000
b) 18000
c) (-) 9000
d) 9000

49. An investor buys 4 lots of TATASTEEL futures at Rs.
545 each and sells it at Rs. 447 each. If one
contract is 764 shares, what is the profit / loss in
the transaction.
a) Profit 74872
b) Loss 74872
c) Loss 299488
d) Profit 299488

50. In futures trading initial margin is paid by:
a) Buyer only.
b) Clearing member.
c) Seller only.
d) Buyer and seller.

51. • A farmer expects to sell his wheat in three
months, time in anticipation of a harvest. He
wants to hedge his risk. He needs to:
a) Buy wheat futures now.
b) Buy wheat now.
c) Sell wheat now.
d) Sell wheat futures now.

52. • An investor buys 2 contracts of TCS futures for
Rs. 570 each. He sells one contract at 585. TCS
futures closes the day at Rs. 550. what is the net
payment the investor has to pay/receive from his
broker? 1 TCS contract = 1000 shares.
a) Pay 20000 to the broker.
b) Pay 5000 to the broker.
c) Receive 5000 from the broker.
d) Receive 15000 from the broker.