What does a hedge funds trades moving against it mean

Assignment Help Financial Management

Reference no: EM131303239

The financial writer Sebastian Mallaby observed about hedge funds that: . . . leverage also made hedge funds vulnerable to shocks: If their trades moved against them, they would burn through thin cushions of capital at lightning speed, obliging them to dump positions fast- destabilizing prices.

a. What does a hedge fund's trades "moving against it" mean?

b. Why would a fund's trade moving against it cause it to burn through its capital?

c. What is the connection between a fund's being highly leveraged and its having a "thin cushion of capital"?

d. What does a fund's "dumping its positions" mean?

e. Why might a fund's dumping its positions cause prices to be destabilized? Prices of what?

Reference no: EM131303239

Questions Cloud

Develop organization plans that focus on integrated systems : Develop organization-wide plans that focus on an integrated systems architecture, security, data architecture, and configuration management.

Appropriate secondary sources : Other sources include EconLit, the bibliographies at the end of articles in The New Palgrave Online. You are free to use any source materials that you find relevant, and that are properly documented.

How much capital will they have to hold : According to an article in the Wall Street Journal on the discussions about commercial bank capital requirements.- How does the amount of capital that a bank has to hold affect its profitability?

How ethical approach affect and is affected by globalization : Using 2 slides describe how your ethical approach affects and is affected by globalization. Conclude with a single slide discussing what was learned in this project.

What does a hedge funds trades moving against it mean : What does a hedge fund's trades "moving against it" mean?- Why would a fund's trade moving against it cause it to burn through its capital?

Discuss about the u.s. army training : Discuss about the U.S. Army Training.A hazardous situation that I have experienced with the U.S. Army was the use of live ammunition during a training exercise. This is a high-risk activity due to the fact that there is a large volume of people usi..

What does greenspan mean by debt leverage : What does Greenspan mean by "debt leverage"?- Why would it matter if "the maturity of the debt is less than the maturity of the assets it funds"?

Analyze the evidence that each author uses to support thesis : Analyze the evidence that each author uses to support his/her thesis: What types of evidence are used? Does the evidence support his or her thesis?

Compute gross margin ebit margin and ebitda margin : Utilizing the financial statements for Major Media Company (included in your Midterm Exam Excel file), perform the following computations. Compute the Company's EBIT and EBITDA for each year presented. Compute Gross margin, EBIT margin, and EBITDA m..

User Account

All Pages