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

Performance budget, Performance budget: it involves evaluation of the perf...

Performance budget: it involves evaluation of the performance of the organization in the context of both overall and specific objectives of the organization. As per the National I

Describe the money market products, Question 1 Under a hire purchase de...

Question 1 Under a hire purchase deal structured by X Finance Ltd. for Y Corporation, the finance company has offered to finance the purchase of equipment that costs Rs. 200 la

Market value ratios, Market Value Ratios Price-Earnings Ratio ...

Market Value Ratios Price-Earnings Ratio P/E ratio shows how much investors are willing to pay for earnings per share of the company. Market-to-Bo

Laspeyres method, Laspeyres Method Laspeyres method uses the quantities...

Laspeyres Method Laspeyres method uses the quantities consumed during the base period in computing the index number. This method is also the most commonly used method which inc

What was the second ground of criticism, What was the Second ground of crit...

What was the Second ground of criticism of traditional treatment Second ground of criticism of the traditional treatment was that focus was on financing problems of corporate e

A company has total debt , A company has total debt of $1,200 and a debt-eq...

A company has total debt of $1,200 and a debt-equity ratio of 0.5. What will be  the value of the total assets?

Implementing systems effectively, Implementing Systems Effectively: Muc...

Implementing Systems Effectively: Much of the accounting process has been taken over by office automation systems. Whereas once the vast majority of bookkeeping and reporting t

Symmetric cash matching, We have earlier studied that the investor ma...

We have earlier studied that the investor may have to carry cash for some time because of discrepancies arising between the timing of the bond's cash-flow and the

Computing the expected total return for investment, To compute the total ...

To compute the total returns we need the investment horizon, reinvestment rate and the price of the bond at the end of the investment horizon. Steps involved in computi

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