Contract Calculation

For a typical transaction of CFD, we have a set of states S\mathbb{S}S
:
S={Sopen,⋯ ,St,⋯ ,Sclose}\mathbb{S}=\{S_{open},\cdots,S_t,\cdots,S_{close}\}S={Sopen​,⋯,St​,⋯,Sclose​}
​SopenS_{open}Sopen​
 is the state at the time which the position is opened.
​ScloseS_{close}Sclose​
 is the state at the time which the position is closed.
​StS_tSt​
 is the state of each moment ttt
 during the holding period of position.
For each transaction with a given set S\mathbb{S}S
, trader deposit initial margin mmm
 at SopenS_{open}Sopen​
 and withdraw the remaining equity eee
 at ScloseS_{close}Sclose​
.
The amount of remaining equity eee
 is determined by mmm
, SopenS_{open}Sopen​
, ScloseS_{close}Sclose​
 and SliquidationS_{liquidation}Sliquidation​
, which can be described as follows:
e={f(m,Sopen,Sclose),Sliquidation∉S0,Sliquidation∈Se=\begin{cases}
\boldsymbol{f}(m,S_{open},S_{close}),&S_{liquidation}\notin\mathbb{S}\\
\\
0,&S_{liquidation}\in\mathbb{S}
\end{cases}e=⎩⎨⎧​f(m,Sopen​,Sclose​),0,​Sliquidation​∈/SSliquidation​∈S​
​SliquidationS_{liquidation}Sliquidation​
 means the state that the liquidation is triggered.
To illustrate, if the liquidation is not triggered during the holding period of position, then eee
 shall be a function of mmm
, SopenS_{open}Sopen​
 and ScloseS_{close}Sclose​
, while if the liquidation is triggered during the holding period of position, then e=0e=0e=0
.
Since mmm
, SopenS_{open}Sopen​
, ScloseS_{close}Sclose​
 and SliquidationS_{liquidation}Sliquidation​
 are always known for any given moment of a position, eee
 can be calculated accordingly.
The calculation process of remaining equity eee
 is called contract calculation.