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

Answer to an exercise, dear, I found an exercise on the Internet which coul...

dear, I found an exercise on the Internet which could help me has better to understand the finance, but there were no answers. What is that you can help me has to solve it. I''m fr

Financial and management accounting, the salaries paid in 2004 is rs 500000...

the salaries paid in 2004 is rs 500000 outstanding is rs 20000 salaries paid in advance for 2004 is rs 30000 what is the actual salary expenditure for 2004 which accounting princip

Show the limitations of participation, Limitations of participation: 1...

Limitations of participation: 1. Technology and organization today are so complex that specialized work roles are required making it difficult for people to participate succes

Exchange rate changes decrease risk of foreign investment, Would exchange r...

Would exchange rate changes all time increase the risk of foreign investment? Discuss the condition within which exchange rate changes may actually decrease the risk of foreign inv

Cash outflows and income statement of a company, a. You only need to compl...

a. You only need to complete the 2012 column, leave the 2011 column as is. b. Base you net income and certain other information needed from the income statement you completed in

Describe duties of the financial manager in a business firm, Describe the d...

Describe the duties of the financial manager in a business firm? Financial managers evaluate the firm's performance, determine what are the financial consequence will be if the

Public financial statements of a company, Public Financial Statements of a ...

Public Financial Statements of a Company The final exercise is the valuation of a publicly held company's equity. You must base your valuation on the company's public financia

Modern approach, Meaning merits nd demerits of modern approch of financial ...

Meaning merits nd demerits of modern approch of financial management

Valuing mortgage-backed and asset-backed securities, A cash-flow yield is t...

A cash-flow yield is the discount rate that makes the price of a mortgage-backed or asset-backed security equal to the present value of its cash flows. It is built

Determine about the synergistic effect, Determine about the synergistic eff...

Determine about the synergistic effect When two or more companies join together there must be a synergistic effect. Synergy is when 2 + 2 = 5. Net present value of the two comp

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