Example on hedge fund, Financial Management

Assignment Help:

Q. Example on hedge fund?

Hedge Fund enters agreement to sell HK$ in six month's. At expiration the Hedge Fund requires to buy spot HKD and deliver these against the short future's position.

If the peg embraces the cost of replacing the HKD it has sold is fundamentally the 6 month differential between USD and HKD interest rates.

On Thursday August 20th the dissimilarity in inter-bank interest rates was about 6.3% Hong Kong rates being higher due to heavy demand for HKD loans which are needed to short the currency. Consequently a hedge fund manager making a USD 1 million bet Thursday against the HKD would have paid USD63000.

If the finance manager believed that the peg would break and thus the HKD depreciate say about 30% then the potential profit would be USD300000. Evaluated to the cost of making the trade USD63000 this is a good profit.


Related Discussions:- Example on hedge fund

Analyse and interpret company financial statements, INSTRUCTIONS Downl...

INSTRUCTIONS Download the 2011 Annual Report for Marks and Spencer PLC, from the link provided on Study Space. Review the Annual Report, paying particular attention to the Fin

Invitation of bids and bid publicity, I nvitation of bids and bid publicit...

I nvitation of bids and bid publicity In previous sub section we learnt how the bid capacity for works and goods are calculated. We discussed how to prepare the bid documents,

Explain the working of insurance companies, Insurance companies The pri...

Insurance companies The primary purpose of insurance companies is to protect individuals and firms known as policy-holders from adverse events. Insurance companies receive prem

Leverage, Evaluate the importance of leverage in financial management of a ...

Evaluate the importance of leverage in financial management of a small scale company

Issuer’s considerations, Issuer's Considerations Cash Flows: Issuers ma...

Issuer's Considerations Cash Flows: Issuers may consider the period for which the funds are required and try to spread the borrowings in a way to minimize the costs. Generally,

Exchange of physicals, Exchange of Physicals: A trader can also complet...

Exchange of Physicals: A trader can also complete the futures contract by engaging in exchange of physicals. In this method, the parties agree to exchange cash and the commodit

The oasis report, The Oasis Report Amidst all these problems, the Minis...

The Oasis Report Amidst all these problems, the Ministry of Social Justice and Empowerment constituted a committee with a view to improve old-age social security in the country

Expected value application in finance - safety stock level, Safety Stock Le...

Safety Stock Level The simple Economic Order Quantity (EOQ) model used in inventory management assumes that the reorder point  will be at a level equal to (Lead time in number

Help ASAP, If firm A has a higher debt-to-equity ratio than firm B then tha...

If firm A has a higher debt-to-equity ratio than firm B then that means what

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd