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

Remaining differences with us gaap, Remaining differences with US GAAP ...

Remaining differences with US GAAP IFRS 8 comprise intangible assets as part of the non-current assets. SFAS 131 only refers to tangible assets. IFRS 8 requires method

Determine the wealth maximisation decision criterion, Wealth Maximisation D...

Wealth Maximisation Decision Criterion This is also called as value maximisation or net present worth maximisation. Presently academic literature value maximisation is almost u

Financial management assignment, You have just had your 30 th birthday. Yo...

You have just had your 30 th birthday. You have two children. One will go to college 12 years from now and require four yearly payments for college expenses of RM11,000, RM12,000

Explain the checklists -documenting the accounting system, Checklists or qu...

Checklists or questionnaires Audit firm will have a standard list of control questions. Audit staff can quickly ascertain which if any, are in operation by the client. There

Operating cycle, make an cash conversion cycle of cabbages

make an cash conversion cycle of cabbages

Mathematical property of median, Mathematical Property The sum of the d...

Mathematical Property The sum of the deviations of the items from median, ignoring signs, is the least. For example, the median of 6, 10, 14, 18 and 22 is 14. The deviations fr

Types of efficiency-efficient market hypothesis , Types of Efficiency   ...

Types of Efficiency    Efficient market theory can be described in three ways: 1) Allocative Efficiency: A market is allocatively proficient when it directs savings tow

Price-yield relationship in bonds, Typically in a bond, we find...

Typically in a bond, we find an inverse relation between the price and the required yield. We know that the price of the bond is the present val

Dividends, Company X is expected to maintain a constant 7% growth rate in t...

Company X is expected to maintain a constant 7% growth rate in their dividends, indefinitely. If company X has a dividend yield of 4%, what is the required return on their shares?

Advanced Accounting, Balance Sheets Peony Ltd. Aster Ltd. ...

Balance Sheets Peony Ltd. Aster Ltd. Assets: Cash $ 62,500 $ 25,000 Accounts receivable 187,500 200,000 Inventori

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