Show example on hedge fund, Computer Networking

Assignment Help:

Q. Show example on Hedge Fund?

Hedge Fund have been playing a no-lose game

In the easiest strategy a hedge fund borrows Hong Kong dollars (HKD) and then sells them in the market against USD that is they short the HKD. Note that this will results the money supply to shrink. A reduce in money supply leads to an interest rates increase. Raise in interest rates have several effects on the stock market. First borrowing HKD to purchase stocks becomes more expensive.

2275_Show example on Hedge Fund.png

Therefore fewer investors would use margin. Second a raise in deposit interest rates will draw funds from stocks to deposits. Third interest rate raise are negative for businesses and their value will go down. Yet again stocks decline.

Alternatively higher interest rates lure more investors to park their money in Hong Kong boosting the currency. But they as well slam the stock market because rising rates hurt company's ability to borrow and expand.

However several of these Hedge Funds involved in the speculation didn't operate in the cash market. In its place they shorted the HKD in the futures markets. This doesn't require borrowing HKD. It is the counterparty who has to hedge the long HKD position that requires to borrow HKD from the banking system.

In the particular situation discussed here Hedge Fund managers believed that they were taking little risk

The hedge funds stake on the collapse of the peg. If the dowel breaks the HKD is expected to fall. Specified the psychology of those days the casual view was that the HKD was overvalued. The merely risk to Hedge Funds is that the peg holds.

Under these conditions their loss will be the dissimilarity between the initial cost of entering the trade to sell HKD in futures markets and the pegged rate. The reading proposed that this cost is low.

Related Discussions:- Show example on hedge fund

Define pptp (point-to-point tunneling protocol), Can you define PPTP (Point...

Can you define PPTP (Point-to-Point Tunneling Protocol)?

Difference between baseband and broadband transmission, What is difference ...

What is difference between baseband and broadband transmission? In a baseband transmission, the whole bandwidth of the cable is consumed by a one signal. In broadband transmiss

Describe the various fibre channel standards, Network Data Storage 1. W...

Network Data Storage 1. What is the Small Computer System Interface Architecture 2. Describe the various Fibre Channel standards. 3. What is the difficulties in building

Which layer is responsible for framing, The Data link layer performs the fo...

The Data link layer performs the following: Responsible for physically passing data from single node to another. Translates messages from the upper layers into data frames and adds

Explain the term- bits and bitmap, Explain teh term- Bits and Bitmap ...

Explain teh term- Bits and Bitmap Many tiny dots, which are put together to make a picture. Bits are combined to make a graphic image called a bitmap. GIF and JPEG files are

Challenge handshake authentication protocols (chap), Challenge Handshake Au...

Challenge Handshake Authentication Protocols (CHAP) CHAP as its an implies implements  a form of authentication that  requires a challenge  and a response. A CHAP authenticator

Determine the task which should intranet require, Determine the task which ...

Determine the task which should intranet require Intranet to work smoothly, the following tasks should be properly synchronised: All computers connected together in a n

Objectives of operating system for parallel computer, Objective : After...

Objective : After going through this part you will be sure to explain the features of software and operating systems for parallel computers. In particular you should be able

What are the protocol support tools, What are the Protocol Support Tools ...

What are the Protocol Support Tools The Intranet should support the tools meant for providing various services on the Internet through the protocols. In addition to the convent

How intranet is different from internet, How Intranet is different from Int...

How Intranet is different from Internet? Generally an Intranet is different from an Internet in the following ways: i. Intranet is a network within the organisation whereas

Write Your Message!

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