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

Examine about the risk-based auditing, Examine about the Risk-based auditin...

Examine about the Risk-based auditing A risk based audit will be reviewing the risk management process and considering main risks of the organisation as a whole. Risk manage

Explain the factors affecting the choice of a minimum cash, Explain the fac...

Explain the factors affecting the choice of a minimum cash balance amount. The minimum cash balance amount is defined by how easy it is to raise funds when required, how expected

Explain banks circumtances to impose compensating balances, What are compen...

What are compensating balances and why do banks require them from some customers?  Under what circumstances would banks be most likely to impose compensating balances? Compensa

Deficiency in operation, Deficiency in Operation - This exists when a prope...

Deficiency in Operation - This exists when a properly designed control doesn't operate as designed or when person performing the control doesn't possess the necessary authority or

What is maturity, Q. What is Maturity? Maturity: The maturity period of...

Q. What is Maturity? Maturity: The maturity period of the securities should be short, otherwise, the company might suffer losses on account of getting the funds pre-maturely re

Budget setting styles, Advantages and disadvantage of pacipatory style of b...

Advantages and disadvantage of pacipatory style of budgeting

Services of an overseas factor, Several overseas factors are subsidiaries o...

Several overseas factors are subsidiaries of UK banks or their agents who offer facilities to companies with export credit sales usually of above £0.25m. Overseas factors carry out

State about the internal benchmarking, State about the Internal Benchmarkin...

State about the Internal Benchmarking Compare an internal function to 'the best internally' within same organisation for example different methods of cleaning used by hospit

Conversion price, It is the exercise price at which the investor or...

It is the exercise price at which the investor or the bondholder exchanges the bond for shares.

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