...the purchase price. After the merger is completed, the target's stock will be converted into stock of the acquirer based on the exchange ratio predetermined in the merger agreement. The arbitrageur delivers the converted stock into his short position to complete the arbitrage. In an efficient capital market, the price of the target and acquirer will fully and immediately reflect the terms of the merger. However, risk arises from the possibility of deals failing to go through. Such possibility put the risk in the term “risk arbitrage”. Green circle had USD 500 million in AUM with 5% upper bound of position in a distinct investment (or 25 million). Smith arbitrage position was within the bounds or 13.5 million in short Abbot and 12.5 million in long position for Alza stocks. The proportion between Abbot and Alza shares was determined by the appropriate market prices of Abbot and Alza shares and announced exchange ratio of 1.2 Abbot sahres per 1 Alza share under the merger deal agreement. The potential return on investment could be up to 10% (or 19% annualized). Such high potential return on the investment is balance by the risk of deal break. For calculations...
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...pound Grade A ostrich carcasses. The daily Price cannot be $0.05/lb. above or below the previous day’s settlement price. 2. i) According to world – ostrich organization (http://www.world-ostrich.org/demand.htm), the current demand for ostrich meat is way far more than supply. Therefore, there will be a constantly increase in the price of ostrich meat. Investors are reluctant to take short positions of ostrich meat futures; however, there would be a lot of people willing to take long positions. Thus, the long positions will be in far excess of short positions. Was the market exist, it would not be balanced. ii) Breeders of the ostrich meat, such as rancher, who tend to avoid the risk of ostrich disease or to offset the rising of feed price, will undertake short position of the future contract. The users of the ostrich meat, such as the food processor, who expect the price to rise, will undertake long position. For example, an investor who expects the ostrich meat to be in excess of demand will long the contract. 3. i) The deliverable grades of the contract are specific, it includes the weight, grade, and the pack standard of the meat, this will help the contract to be better executed. ii) The daily price limit of each contract is 5 cents per pound ($3,000/contract) above or below the previous day’s settlement price (expendable to $0,075/lb) which could secure the loss of both sellers and buyers. 4. i) The trading unit of 60,000 lbs. is not appropriate for a meat...
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...Cover Letter Advice When writing a Cover Letter to send to a potential employer, try to include the following elements: 1. State what are you applying for eg. "I am writing to apply for the position of Marketing Assistant..." 2. Say why are you applying for this specific position. eg. "I am passionate about marketing and feel that this position would enable me to develop my skills further..." 3. Elaborate on why you want to work for this specific company. eg. "... in your company, to become part of such an iconic brand..." 4. Give some basic pesonal information. eg. "I am a third year ESPEME student at EDHEC Business School, Nice,.." 5. List a few of your best qualities and motivations. eg. "I am highly motivated, hard-working, with great attention to detail..." 6. Let them know that relocation isn't a problem, if the position involves moving to another country or city.eg. "London is an interesting city, and I would enjoy working in such a vibrant environment..." 7. Specify that you are enclosing (post) or attaching (email) your CV eg; "Please see my attached CV for your consideration..." 8. End the letter hopeful and confident of a response.and ususally signed "Yours sincerely" eg "I look forward to hearing from you." 9. Re-read your Cover Letter and ensure that it is concise, polite and formal. 10. Remember, you need to try to "stand out from the crowd"! The person receiving your application may receive hundreds of applications...
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...capitalization rate). Liquidity – the ability to convert an asset into cash easily and at fair value * Long position – if you are “Long” a stock, you own it. * Short position -- If you are “Short” as stock, you have shorted it. Order Type | Purpose | Trigger price | Market Order | Trade (buy, sell or short) at current price | N/A | Limit buy | Buy at an attractive price | Below current price | Limit sell | Sell at an attractive price | Above current price | Stop-loss | Limit loss on a long position | Below current price | Stop-buy | Limit loss on a short position | Above current price | * Limits and Stops are called contingent trade orders because the trade is contingent on the price. * Margin percentage = equity/stock * Equity=Assets-Liabilities * For long positions the stock is an asset rf= 30 year treasury (thay E(rm)-rf = MRP) * When the constant growth DDM holds, the stock price will grow at the same rate as dividends * Capital Gains Yield equals ‘g’ * The Expected HPR then is: * Growth Rate: g= ROE * b * b= plowback ratio= (1- payout ratio) * payout ratio = div/EPS * ROE = Net Income/Shareholder’s Equity * The capital asset pricing model (CAPM) defines the relationship between risk and return E(RA) = Rf + A(E(RM) – Rf) * Risk-free rate Analysts and Corporations typically use current market yields on long-term bonds * The expected risk premium of an asset depends on the market risk premium and the...
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...1.10 x 0.35 x 2 2x 0.85 cu.m. F.A. 2x 2.31 sq.m. Cutting List To be purchased Converted into Kilograms ALONG SHORT SPAN 2x 12pcs-12mmdia x 1.10m 3pcs-12mmdia x 9.00 24.00 kgs ALONG LONG SPAN 2X 12pcs-12mmdia x 2.20m 3pcs-12mmdia x 9.00 24.00 kgs -------------------------------------------------------------------------------------------------------------------------------------------------------- F ALONG LONG SPAN 1X 116pcs-10mmdia x 0.30m 6pcs-10mmdia x 6.00 24.00 kgs C-1 2-units (Foundation up to top of Roof Beam Level) Volume 0.15 x 0.40 x 6.60 x 2 2x 0.40 cu.m. F.A. 2x 7.26 sq.m. C Concrete : cu.m. F.A. : sq.m. Structural Grade 33 : Intermediate Grade 40 : S-1 Volume 0.115x 3.45x 4.40 1x 1.75cu.m. F.A. 17.00 sq.m. Cutting List To be purchased Converted into Kilograms Remarks Along Short span Excess 1x 34pcs-12mmdiax 3.45m 17pcs-12mmdiax 7.50m 113.27 kgs 1x 8pcs-12mmdiax 2.10m 2pcs-12mmdiax 9.00m 16.00 kgs Extra Bars Along Short span 1x 88pcs-12mmdiax 1.00m 15pcs-12mmdiax 6.00m 80.00 kgs Along Long span 1x 27pcs-12mmdiax 4.40m 13 1/2pcs-12mmdiax 9.00m 111.93 kgs 4.60m 1x 6pcs-12mmdiax 2.50m 2pcs-12mmdiax 7.50m 13.33 kgs Extra Bars Along Long span 1x 64pcs-12mmdiax 1.20m 13pcs-12mmdiax 6.00m 69.29 kgs -------------------------------------------------------------------------------------------------------------------------------------------------------- ...
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...BUS 415: Investment and Portfolio Management SPRING 2011, AUBG Quiz 1(a) 1. If you place a stop-loss order to sell 100 shares of stock at $55 when the current price is $62, how much will you receive for each share if the price drops to $50? A. $50 B. $55 C. $54.87 D. Cannot tell from the information given Answer B. The broker will sell at current market price, after the first transaction at $55 or less. 2. You wish to sell short 100 shares of XYZ Corporation stock. If the last two transactions were at $34.12 followed by $34.25, you can sell short on the next transaction only at a price of: A. $34.12 or higher B. $34.25 or higher C. $34.25 or lower D. $34.12 or lower Answer B. 3. If you buy 100 shares at $20 per share with 50% margin, the cash you must put in your brokerage account is _______________. A. $2,000 B. $1,500 C. $1,000 D. $500 Answer: C 50% = (100*20 – L) / (100*20) Liability =1000 Initial Cash outlay = 1000 4. If you originally bought 100 shares at $20 per share with 50% margin, and the price of the security falls to $15 per share, your margin now is ____________________. A. 100% B. 67% C. 50% D. 33% E. 0% Answer: D 50% = (100*20 – L) / (100*20) => Liability = 1000 Margin = (100*15 - 1000) / (100*15) Margin = 33% 5. Suppose you short sold 100 shares of DIS at $40 per share, and that the broker required 50% margin. On the next day...
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...Julius Chen George Chiu Armen Odadjian Mengyang Wu FBE459: Stock-Trak End of Semester Report Our portfolio had a return of +6.97% as of November 28th compared with a +3.86% return on the S&P 500 in the same time period. We ended with a Sharpe Ratio of 4.30 and portfolio beta of 0.23. Over 136 trades, we employed various option strategies, longed and shorted equities, speculated on commodities with futures, and invested in fixed income securities. Listed below are a few highlights and in-depth analysis of the strategies that we used. Protected Put Ticker | Position | Cost | Strike | S0 | ST | Profit/Loss | MU | Long | | | 30.61 | 34.30 | +$369.00 | | Buy Put | 1.72 | 31 | 30.61 | 34.30 | -$172.00 | DVN | Long | | | 59.02 | 67.20 | +$818.00 | | Buy Put | 1.60 | 57.5 | 59.02 | 67.20 | -$160.00 | SSYS | Long | | | 116.63 | 102.42 | -$1,421.00 | | Buy Put | 6.70 | 115 | 116.63 | 102.42 | +588.00 | *where S0= price at position open and ST=price at position close On October 22, we entered into three protect put strategies for Micro Technology (semiconductor maker), Devon Energy Corp. (energy company), and Stratasys, Ltd. (3-D printer maker). Our team believed that each company would outperform their peers in their perspective industries. Each company, however, operates in volatile industries. The semiconductor industry suffers from cyclical demand and producers often see margins slashed due to constant price wars. The stock prices of energy companies often...
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...funds strategy. Also known as the short extension strategy, the 130/30 is basically investing long 130 $ for each 100 $ of equity and take a short position on 30$. Based on the results of a previously published research, stock portfolios with low volatility have been showing persistent low volatility in the ensuing years as well. On top of that, these same portfolios showed comparable returns to the broad based stock indexes like the S&P 500 and the Russell 1000. Jacques wants to exploit this strategy in their investment portfolios. An investor considering a 130/30 fund should weigh several factors: • What is the exact size of the short position, and any additional portfolio constraints?: Managers may attempt larger shorting ratios as they become better at identifying investment opportunities, but this also leads to a larger emphasis on management skill and potentially greater market risk. • How large is the historic tracking error rate?: Larger shorting ratios lead to a larger tracking error, or a deviation of the portfolio from the market performance. Does the fund exceed the typical 3-4% tracking error? • What are the tax implications created by the fund?: Are funds being borrowed or only obtained through short sales to cover the extra-long position? Funds that borrow money for the long position incur additional tax liability. • Are there enough dividends in the long position to cover the short dividend obligation?:...
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...Fighting the scams, frauds and charlatans The Original T urtle Trading Rules ORIGINALTURTLES.ORG The Original T urtle Trading Rules 2003 OrignalTurtles.org T able of Contents Volatility Adjusted Position Units Examples F O R E W O RD 14 14 Free Rules? Are you kidding? 1 The Importance of Position Sizing 15 The Origin of the Free Rules Project 1 Units as a measure of Risk 16 The Ugly Truth about the System Sellers 2 Adjusting Trading Size 17 Rules You Won’t Follow Don’t Matter 3 The Genesis of the Project 3 C H A P TE R F O U R Entries Breakouts The Turtle Experiment C H A P TE R 5 18 Adding Units 19 Consistency I N T R OD U CT I ON 18 20 O N E A Complete Trading System 7 C H A P TE R The Components of a Complete System 8 Stops 21 Markets – What to buy or sell 8 Turtle Stops 21 Position Sizing – How much to buy or sell 8 Stop Placement 22 Entries – When to buy or sell Alternate Stop Strategy – The Whipsaw 23 Benefits of the Turtle System Stops 24 8 Stops – When to get out of a losing position9 F I VE Exits – When to get out of a winning position 9 C H A P TE R Tactics – How to buy or sell 9 Exits 25 Summary 9 Turtle Exits 26 These are Difficult Exits 26 C H A P TE R S I X T W O Markets: What the Turtles Traded 10 C H A P TE R S E VE...
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...The topic I choose to research on is the effect of short selling on economy. Short selling is when an investor borrows shares of trading security fro his or her brokers, sell the stock immediately, and use the proceeds to buy back the stock at a lower price. Essentially, it is a way for investor to profit when the price of a trading security goes down. Since I am finance major, this topic is highly relevant to me an I want to know more about it. I first used Google to search for information about short selling. I used the search terms “short selling article.” Google returned a large amount of links, mostly website explaining and discuss the concept of short selling. Many popular articles about the topic showed up. However, when I tried to find scholarly article about the topic, the results were very limited. Most of time, it took me to a site with an abstract of scholarly articles. I then tried using a search limiter such as putting quotation marks around “short selling” and “scholarly articles.” All it returned were sites that want me to pay for the scholarly articles. I guess using Google is great when one needs to get acquainted with new topic and read popular articles, but is very ineffective in find scholarly articles that are relevant to a topic. Next, I tried using a meta-search engine call called Dogpile. Dogpile displays the combined results from general search engines such as Google, Yahoo, Bing, Yandex. The results were much more comprehensive...
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...Trading Strategy a. On the spread sheet columns E,F,G (PEP) and NOP(KO) are the various normalized N-day returns for the two stocks (N ranges from 5, 10, and 20 days). b. Column HIJ and QRS are c. Finally the differences between the z normalized returns are expressed in columns TUV (For example: T=zret5_pepsi minus zret5_coke). These are used find entry points and trade based on the spread. d. Trading on the spread means that when we go long the spread (Pepsi – Coke) it is equivalent to going long Pepsi and short Coke. When one of the stocks outperforms the other by a specific amount over a specific time period, you could short the outperformer and go long the underperformer with the expectation that prices will revert. e. Signal Column- If zdiff5 is less than the long entry threshold then long i.e 1, if zdiff is greater than short entry threshold then short i.e -1, if neither of the two then no signal i.e 0 f. Cap Column- If previous day’s position is long and zdiff5 > long cap then cap is hit. Vice versa for short position. g. Age Column- Age =1 if {(i) new signal and no previous position, (ii) flips position signal*previous position=-1, (iii) reach holding period limit and new signal is generated.} Age=0 if {(i) nothing happening and no previous position, (ii) hits cap, (iii) reached holding period and no new position.} Else, Age= Age+1 If((OR(AND(X9<>0,AC8=0),X9*AC8=1,AND($B$5=AA8,X9<>0),IF(OR(AND(AC8=0...
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...Business Ethics Reflection Antonio Riley XMGT216 June 12, 2011 Michael Kollenberg Business Ethics Reflection There was a time in which my mother was a department manager for one of the largest grocery retailers in the United States. Her department cash register would always come up short either at the end of the day or on her off days. In her department, two of her employees were people that she knew personally. One of her employees decided to let her know that the other employee was stealing money from the cash register. She told my mother that the head manager had been watching the other employee for a least two weeks and it was a setup to see how long that this problem would continue. My mother was skeptical of how this person because this person would claim to add money to the till so that it would not continue coming up incorrect. The dilemma she faces was that she had known this person since childhood and also the fact that she was good friends with the woman sister, whom had been murder shortly before this problem occurred. My mother had to make a decision on does she go on what this person is saying or does she report her suspicions to her boss. She decided to put a side friendship and let her boss know about her suspicions. After meeting with her boss, it was decided by her boss to have this employee watched to see if she was stealing. It was determined that she was stealing and management decided to let her resign or get terminated. She was not fired because...
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...3-) In order to build a hedge portfolio by combining regular Treasuries and TIPS that has exposure to inflation risk but not to real interest risk, short position should be taken in regular Treasuries and long position should be taken in TIPS. Amount and durations of the positions should be equal. This combination will have no real interest risk. Infilation risk still exists since the nominal Treasuries have no protection on infilation. In inflation increased, positive returns will be gained. 3-) In order to build a hedge portfolio by combining regular Treasuries and TIPS that has exposure to inflation risk but not to real interest risk, short position should be taken in regular Treasuries and long position should be taken in TIPS. Amount and durations of the positions should be equal. This combination will have no real interest risk. Infilation risk still exists since the nominal Treasuries have no protection on infilation. In inflation increased, positive returns will be gained. 3-) In order to build a hedge portfolio by combining regular Treasuries and TIPS that has exposure to inflation risk but not to real interest risk, short position should be taken in regular Treasuries and long position should be taken in TIPS. Amount and durations of the positions should be equal. This combination will have no real interest risk. Infilation risk still exists since the nominal Treasuries have no protection on infilation. In inflation increased, positive returns will be gained.3-) In...
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...will the option be exercised? Draw a diagram showing how the profit on a short position in the option depends on the stock price at the maturity of the option. The seller of the option will lose if the price of the stock is below $56.00 in June. (This ignores the time value of money.) The option will be exercised if the price of the stock is below $60.00 in June. The profit as a function of the stock price is shown in Figure S1.2. [pic] Figure S1.2 Profit from short position In Problem 1.1 Problem 1.19. “Options and futures are zero-sum games.” What do you think is meant by this statement? The statement means that the gain (loss) to the party with the short position is equal to the loss (gain) to the party with the long position. In total, the gain to all parties is zero. Problem 4.1 Answer in text book http://www.eeweb.com/toolbox/calculator Problem 4.5 Zero rates for the following maturities are as below in continuous compounding rates. Find the forward interest rates for the second, third, fourth, fifth, and sixth quarters Maturity Rate 3 8.0 6 8.2 9 8.4 12 8.5 15 8.5 18 8.7 Answer: Qtr2: 8.4% Qtr3: 8.8%...
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...NIKKEI 225 RECONSTITUTION 1) As a portfolio manager for the HEC-UNIL Advisors Nikkei 225 Index Fund, which has ¥100 billion of assets linked to Nikkei 225 index, what would you do when you hear the news of index reconstitution? The Nikkei 225 is a price-weighted average of the stocks it incorporates. It simply adds the prices of the 225 stocks and divides this sum by a divisor. When the announcement about index change takes place, the index is calculated as the above-mentioned method until the new composition of stocks becomes effective. The announcement date and the date of “effectiveness” are different – there is a time period between them. After the effectiveness date the shares of new member companies are added and divided by the new divisor. The price sequence has to be maintained by the index. Therefore, the new divisor is calculated to guarantee the sequence before and after the effectiveness date. The equation below must be satisfied: Σ 225 stocks before changeDivisor before change= Σ 225 stocks after changeNew divisor From the point of view of one who does not like a lot of risk and wants to minimize it. So, I would like to sell stocks that will be deleted and then will be stocks that will be added one day before the effectiveness date. In this case, if I would be able to swap the deletions and additions at the date, I would bear no risk. 2) What would you do if, instead, you were at the proprietary trading desk of Goldman Sachs? There are two possible...
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