# Contract Calculation

For a typical transaction of CFD, we have a set of states $\mathbb{S}$:

$S_{open}$

*is the state at the time which the position is opened.*$S_{close}$

*is the state at the time which the position is closed*.$S_t$

*is the state of each moment*$t$*during the holding period of position.*

For each transaction with a given set $\mathbb{S}$, trader deposit initial margin $m$ at $S_{open}$ and withdraw the remaining equity $e$ at $S_{close}$.

The amount of remaining equity $e$ is determined by $m$, $S_{open}$, $S_{close}$ and $S_{liquidation}$, which can be described as follows:

$S_{liquidation}$

*means the state that the liquidation is triggered.*

To illustrate, if the liquidation is not triggered during the holding period of position, then $e$ shall be a function of $m$, $S_{open}$ and $S_{close}$, while if the liquidation is triggered during the holding period of position, then $e=0$.

Since $m$, $S_{open}$, $S_{close}$ and $S_{liquidation}$ are always known for any given moment of a position, $e$ can be calculated accordingly.

The calculation process of remaining equity $e$ is called **contract calculation**.