sources‚ with the rise in the covered bond market and the increase in securitisation made banks dependant on capital markets and less dependant on expanding their loan base allowing banks to easily switch deposits to other forms of financing‚ acquiring funds from affiliates for example. 2 Growth in securitisation activity created a lack of incentive for banks to grant credit and comply with monetary policy changes‚ an unregulated approach to the screening of borrowers‚ checks would assume securities
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Established in January 1999‚ Pine Street Capital (PSC) was a market-neutral hedge fund that specialized in the technology field‚ facing market risk and trying to decide whether and which way to use in order to hedge equity market risk. They choose technology sector because the partners of PSC felt that they have enough ability to evaluate this sector and specially be good at picking out-performing stock. Short-selling of NASDAQ and options hedging strategy are the two major hedging choices for PSC
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case‚ please visit: http://hbr.org/product/pine-street-capital/an/201071-PDF-ENG Due date: December 05‚ 2013 Questions: 1- What risks does PSC face? How has it hedged these risks historically? Should it continue to hedge these risks? - Market neutral fund – fund hedged out all market risk - In the past‚ they hedged this out by short-selling shares of a market index - Due to the unprecedented volatility seen in the markets over the past several months‚ considering hedging by purchasing
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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 funds and hedge funds today. Also in 1986‚ the firm underwrote the IPO of Microsoft‚ advised General Electric on its acquisition of RCA and joined the London and Tokyo stock exchanges
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| FI475-Project Study | Six Derivatives Mishaps | 2012/5/8 | Sumitomo (future contracts) Background: 1996‚ Sumitomo Corporation was one of the top copper market makers in the world. During the over 10 years under Hamanaka‚ who was a genius charged on allegations that he could manipulate the price of the metal‚ Sumitomo lost at least $1.8 billion as a result of what it said were unauthorized trades‚ which then lost a third of its value on world markets in less than two months. The affair was
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thought to lower risk–weighted assets • But became a speculative bet on the shape of the yield curve “flawed‚ complex‚ poorly reviewed‚ poorly executed‚ and poorly monitored. The portfolio has proven to be riskier‚ more volatile and less effective as a hedge than we thought‚” Intro Abuse Risk Activities Policy LIBOR scandal • LIBOR/EURIBOR benchmark interest rate (average • • • • reported rate) Very costly because many contracts (e.g. derivatives and mortgages) have the rates set
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sell the securities to the savers. Although the securities are sold twice‚ the two sales constitute one complete transaction in the primary market. Financial Intermediary In the Financial Intermediary method of Capital transfer savers invest funds with a intermediary‚ which then issues its own securities in exchange. Banks are one type of intermediary‚ receiving dollars from many small savers and then lending these dollars to borrowers to conduct various financial
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and Managing Investment Portfolios: A Dynamic Process. Ackerman‚ Carl‚ Richard McEnally‚ and David Ravenscraft. 1999. “The Performance of Hedge Funds: Risk‚ Return‚ and Incentives.” Journal of Finance. Vol. 54‚ No. 3: 833–874. ACLI Survey. 2003. The American Council of Life Insurers. Agarwal‚ Vikas and Narayan Naik. 2000. “Performance Evaluation of Hedge Funds with OptionBased and Buy-and-Hold Strategies.” Working Paper‚ London Business School. Ali‚ Paul Usman and Martin Gold. 2002. “An Appraisal
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CASE STUDY: Strategic Capital Management ------------------------------------------------- NOTES SCM LLC 12.9.1998 – Elena raised $20 million for her new fund Interested in Ubid‚ recently had an IPO—lucrative Internet-sector investment? Mandate of generating 10% annual returns charge investors 2% management fee of assets under management an incentive fee equal to 20% of profits. Mandatory minimum investment horizon of 2 years Ubid & Creative Computers creative computers – a
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spent much of the last hour of Friday trading near that price‚ with onlookers watching to see if it would post a $37.99 price - which it did not. But the bank will not support the stock indefinitely‚ analysts said‚ and once that firepower is gone‚ funds that received IPO stock looking for a bounce may decide to bail as well. Lead underwriters in a stock essentially "short" the stock through what is known as an "over-allotment" of shares - they sell shares to the market that they do not own. If
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