–S0 Cash Flow at Time T ST + D Short futures 0 F0 – ST Borrow S0 –S0(1 + r) Total 0 F0 + D – S0(1 + r) b. The net initial investment is zero‚ whereas the final cash flow is not zero. Therefore‚ in order to avoid arbitrage opportunities‚ the equilibrium futures price will be the final cash flow equated to zero. Accordingly: F0 = S0 (1 + r) – D c. Noting that D = (d S0)‚ we substitute and rearrange to find that: F0 = S0 (1 + r – d) 7. a. F0 = S0 (1 + rf) = $120
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CDO • Introduction to CDOs • Types of CDOs • Transaction Structure & Mechanics • Evaluation of CDOs • Risk associated with Investing in CDOs • Fair spread estimation with Monte Carlo Simulation • CASE STUDY: HVB ASSET MANAGEMENT ASIA (HVBAM) • CDO in Subprime Mortgage Crisis Introduction to Collateralized Debt Obligations (CDOs) A CDO is an asset-backed security whose underlying collateral is typically a portfolio of bonds (corporate or
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Bibliography: Abreu D.‚ Brunnermeier M. (2002)‚ “Synchronization risk and delayed arbitrage”‚ Journal of Financial Economics‚ Vol. 66‚ 2-3‚ p. 341-360 Barber B.‚ Odean T. (2001)‚ “Boys will be Boys: Gender‚ Overconfidence‚ and Common Stock Investment”‚ Quarterly Journal of Economics‚ Vol. 141‚ 2‚ p. 261-292 De Long B.‚ Shleifer A.‚ Summers
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non-market strategy to create an integrated strategy (Burton). CAGE distance analysis – Mexico /US Cultural Distance: Mexico and the United States share a common border on the northern side. Despite their close physical proximity and mexican adaptations to western styles‚ lots of dissimilarities are observed in the culture‚ beliefs‚ traditions and norms of social conduct of the people in these two countries. A vast majority of Mexican people use Spanish language. In fact‚ Mexico is the country
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MEASUREMENT APPROACH TO DECISION USEFULNESS • (184) MEASUREMENT APPROACH: i. ii. iii. Accountants (not investors) “undertake a responsibility” To incorporate CURRENT VALUE ACCOUNTING directly in to the F/S Provided “reasonable (37) reliability” iv. v. a. b. As part of an “increased obligation” of the accounting profession “To assist investors to predict future performance and value” Performance = N.I. Value = share price vi. Via a “more informative information system”
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Capital Structure Theories Capital Structure Capital Structure is the proportion of debt‚ preference and equity capitals in the total financing of the firm’s assets. The main objective of financial management is to maximize the value of the equity shares of the firm. Given this objective‚ the firm has to choose that financing mix/capital structure that results in maximizing the wealth of the equity shareholders. Such a capital structure is called as the optimum capital structure. At the optimum
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expectation – Δk is the k-difference operator‚ so Δkst+k = st+k - st Covered interest parity (CIP) • Very often forex efficiency is dealt with in terms of spot and forward exchange rates and using CIP (Keynes‚ 1923): – under no barriers to arbitrage across international financial markets‚ the interest rate differential on two assets whose only difference is the currency of denomination‚ adjusted to cover the movement of currencies at maturity in the forward market‚ should be continuously
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spread is SGD1.1832-SGD1.1854. 10. Doug Bernard specializes in cross-rate arbitrage. He notices the following quotes: Swiss franc/dollar = SFr1.5971?$ Australian dollar/U.S. dollar = A$1.8215/$ Australian dollar/Swiss franc = A$1.1440/SFr Ignoring transaction costs‚ does Doug Bernard have an arbitrage opportunity based on these quotes? If there is an arbitrage opportunity‚ what steps would he take to make an arbitrage profit‚ and how would he profit if he has $1‚000‚000 available for this
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the time was a major deal on Wall Street. During Weinberg’s time‚ he also started an Investment Research division and a Municipal Bond department. It also was at this time that the firm became an early innovator in Risk Arbitrage. Risk Arbitage‚ or sometimes called merger arbitrage‚ is an investment or trading strategy often associated with hedge funds. Hedge Funds playing a big deal in today’s market. In 1986‚ the firm formed Goldman Sachs Asset Management‚ which manages the majority of its mutual
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R. Preston McAfee‚ Price Discrimination‚ in 1 ISSUES IN COMPETITION LAW AND POLICY 465 (ABA Section of Antitrust Law 2008) Chapter 20 _________________________ PRICE DISCRIMINATION R. Preston McAfee* This chapter sets out the rationale for price discrimination and discusses the two major forms of price discrimination. It then considers the welfare effects and antitrust implications of price discrimination. 1. Introduction The Web site of computer manufacturer Dell asks prospective buyers
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