Long Term Capital Management (LTCM).
Long Term Capital Management (LTCM) was a first in the financial world; as such organisations dealing with hedge funds had never reached such immense proportions. At its birth and early life, LTCM was like a jewel in the crown for those who were seeking to gain large returns. However, through uncharted waters, LTCM was on a maiden journey. Hedge funds are characteristically structured as foreign limited partnerships to provide pass-through tax treatment of investor earnings. Organized abroad, hedge funds avoid U.S. taxation of the earnings of foreign investors. LTCM built its portfolio on sophisticated arbitrage trading strategies. In addition, LTCM used a significant degree of leverage to increase its expected returns. Whist LTCM used a wide variety of trading strategies, one of the simpler strategies employed was one in which it sorted treasury bond futures while taking long positions on higher yielding and higher risk mortgage backed or corporate debt securities. The strategy- known as buying a credit spread, can generate profit as long as the difference in the yields of the two types of instruments remains stable or declines. Since July 1998, with mounting financial problems in Russia and other emerging markets, sovereign bond prices had steadily risen as investors had engaged in a "flight to quality" from higher, riskier debt instruments (such as emerging market
REVOLVING UNDERWRITING FACILITY vs COMMERCIAL PAPER Introduction Most economic units like a financial institution, government bodies or business organisation are faced with every problems of liquidity management. Money markets are primarily present to cater to the needs of short term working capital needs of these entities. The needs of working capital may range from a measure of short to medium term periods. For medium term capital needs, a Revolving Underwritten Facility is used and for short term needs a Commercial Paper is issued. Revolving Underwritten Facility (RUF ) - A brief insight Revolving Underwritten facility is a credit facility in which a group of underwriting bankers extend a line of credit to a borrower who is unable to sell any of the Eurocurrency notes. It is similar in terms of an overdraft facility that is used by the bank's retail and institutional clients. The loan is extended to the borrower as a credit, rather than buy back the Euro note it is unable to sell. It is credible to note that , global banks which were faced with the same issues of growing competiveness of issuing short time credit , introduced RUF's and its siblings in the form of NIF's. These revolving credit facilities provided clients with the choice of arranging loans which at an spread of slightly greater than the LIBOR and also selling ECP's through the bank's dealing facilities.
Strategy Plan for Lloyds TSB.
STRATEGY PLAN FOR LLOYDS TSB LLOYDS TSB 3 YEAR STRATEGY PLAN Adam McCracken 99/2888 STRATEGIC MANAGEMENT & IS COMP: 4006 ASSIGNEMENT 1 Lecturer: Jim Howell Introduction: In order to complete this strategy plan, it is important to understand what strategy is. A definition of strategy can be seen below. "Strategy is a broad based formula for how business is going to compete, what its goals should be and what polices will be needed to carry out those goals. The essence of formulating competitive strategy is relating a company to its environment. (Porter 1980) This strategy plan for Lloyds TSB will be established after intensive strategic analysis is undertaken in the form of environmental analysis and a current analysis of resources. The importance of creating a new strategy plan for Lloyds TSB has came about with the introduction of Internet banking. Internet banking is an important delivery channel, it is suggested that companies that succeed will be the ones that use the internet as a complement, to traditional ways of competing, not those that set their internet initiatives apart from their established operations as suggested by (Porter 1980). This is clearly apparent within the financial services industry. In order to construct this strategy plan several strategic analysis techniques have be undertaken. Each strategic analysis technique
Why would it be useful for international traders to build up knowledge of the global distribution of income and wealth and how it is changing over time?
International trading 5th of November 2010 Actual word count: 1407 International trading has been around for centuries. Nowadays nations are globalizing, governments are investing in their own nations and in other counties. In the meantime countries are combining together and the revolution of technology has made communication across borders easier. True the innovation of technology global trade adopted a new twist. Therefore international traders are able to do business across the world. Therefore it is for global trade important to gain knowledge of the global distribution, as well as the income and the wealth of a country. In the meantime understanding the overall chances over the time regarding these factors might help their business. Improvement of technology and globalization has lead to social, distribution and industrial development. Business these days can operate on lager scale and communicate better and faster. Technical innovations, capital investments and expeditions of goods and service has taking on the lead, for they are important aspects of economic growth in a country and reflects the health and wealth of a nation. To operate internationally it's important to have knowledge of globalization and have general knowledge of business, government and societies. Globalization it is a process between different figures and factors that includes people,
"Evaluate the various methods that a firm can use to estimate its cost of equity, discussing advantages and disadvantages of each. Why is it important to estimate the cost of equity as accurately as possible?"
"Evaluate the various methods that a firm can use to estimate its cost of equity, discussing advantages and disadvantages of each. Why is it important to estimate the cost of equity as accurately as possible?" Whenever a firm makes a profit, it can take two possible actions. On one hand it could pay out the cash as a dividend. On the other hand the firm can invest the extra cash in a project. The project could be building a new factory for example. The aim of this project would be to provide future cash flows that would increase shareholder wealth. The project should only be undertaken if its expected return is greater than that of a financial asset of comparable risk. In this study I will be looking at the different ways of measuring the cost of equity and why it is important to measure it accurately. From the firm's perspective, the expected return is the cost of equity capital. The capital asset pricing model (CAPM) is one method for calculating this. However, before we look at the model, we must understand how the concept was derived. Stanford professor William Sharpe and the late finance specialists John Lintner and Fischer Black focused on calculating what part of a security's risk can be eliminated by diversification and what part cannot. The result was the capital asset pricing model. The basic concept behind the model is that there is no premium for bearing risks
"Even without a formal agreement firms in oligopolistic markets may be able to sustain a joint monopoly equilibrium. Discuss."
Gemma Thomas Business Economics Essay Term 2 "Even without a formal agreement firms in oligopolistic markets may be able to sustain a joint monopoly equilibrium. Discuss." To understand what the question is asking, a definition of an oligopolistic market is required before I will attempt to answer. An oligopolistic market is characterized by few firms and many buyers, there are a sufficiently small number of firms for interdependence to exist, meaning that each firms prospects depend on rivals as well as their own policies. This interdependence can lead to attempts at communication, coordination and collusion. All decisions made are strategic and rivals responses will have been taken into account. Each time a firm in an oligopolistic market adjusts either price or quantity, any revenue gain is at the expense of its competitors. The competitors whose profit margins are affected are likely to respond by altering their own price or quantity. From this we can understand why there is an incentive for firms to collude. There are four important oligopoly models, the Cournot-Nash model, the Stackelberg model, the Bertrand model and the dominant firm price leadership model, each built upon different assumptions and result in different equilibrium outputs. I am going to examine each in turn, a discussion which mirrors that in Waldman and Jenson1. * Cournot-Nash Model - considers
International Trade, Commerce, Finance and Banking in POLAND
. What is the financial situation of PIGS region? PORTUGAL - Economy, in European Union : Seventeenth-largest Latest GDP figure: 0.9% (Third quarter of 2009) ; Gross debt in 2010, forecast : 84.6% of GDP ; Gross debt in 2007 : 63.6% of GDP ; Jobless rate : 10.4% ; Population : 10,627,250 ; Stocks performance in 2010 : -9.7% (to 11 February) >Portugal - with its high borrowing and sudden reversal in economic fortunes - has been lumped in the same category as its Mediterranean neighbours. The country has vowed not to leave the eurozone, with its finance minister telling the BBC that it faced "an extraordinary and exceptional situation, due to a major financial and economic crisis without precedent in our recent history". ITALY is in a difficult period. the economy is in a sharp recession, mainly because of external developments linked to the global financial crisis, and there is great uncertainty about the strength and timing of the recovery. Despite a relatively healthy banking system Italy seems particularly sensitive to both the credit tightening which has occurred in line with that in other countries and the weakness in external demand. This sensitivity has probably been accentuated both by the poor productivity and aggregate profitability performance of the economy over the past decade or more, and by the weak underlying fiscal situation. An array of budget neutral
The aim of this assignment is to discuss equity share prices with regard to EMH and analyse all forms of investment analysis and research with reference to technical and fundamental analysis to determine if they are actually worthless.
The aim of this assignment is to discuss equity share prices with regard to EMH and analyse all forms of investment analysis and research with reference to technical and fundamental analysis to determine if they are actually worthless. Efficiency forms with tests will be highlighted, market anomalies and also Fama's theory (1965) and other theorist with regard to the weak form and semi-strong form efficiency. The Efficient Market Hypothesis (EMH) is a measure of how quickly and accurately the market reacts to new information. For instants, if prices react fast to information, then investors will not be able to exploit it at the expense of others, at this stage, it is considered to be a fair game; where there is no systematic difference between actual return on a portfolio of securities given its risk profile and the expected return on that security. On the other hand, if prices react slowly, then those with information would have an advantage and could make greater gains over those without, and they would be able to beat the market (make abnormal profit). EMH is an idea partly developed in the 1960s by Eugene Fama. It states that it is impossible to beat the market because prices already incorporate and reflect all relevant information. This is also a highly controversial and often disputed theory. Supporters of this model believe it is worthless to search for undervalued
Financing the Expansion Report to the Board Financial Management & Control Assignment 2
Masters of Business Administration (MBA) Full-time Financing the Expansion Report to the Board Financial Management & Control Assignment 2 2001-2002 session Professor: Ian F Tait Submitted by Julie O'Brien Contents The Company 5 Investment Decision 5 Assumptions 5 Current Capital Structure 6 Objectives 6 Concerns 6 Options Available 7 Issues 8 Recommendation 14 Appendix one Error! Bookmark not defined. References 18 Figures Figure 1 The tax benefit of debt financing 10 Appendices Appendix 2 Industry gearing ratios, no employed and dividend cover 16 The Company The company is a well -established UK plc company carrying on business in the retail sector. Investment Decision The company is planning a major investment programme which will increase the number of retail outlets the company has in the UK by 50% over the next four years. Assumptions For this report the following assumptions have been made about the company: . It is in the retail clothing industry 2. It is quoted as FTSE smallcap (the 450 plus companies capitalised at up to £350 million) 3. The investment decision has been made 4. The company is profit making Current Capital Structure The company at present has no term borrowing. All finance to date has been raised from equity. Objectives The objective is to decide on the company's debt policy in order to finance the investment
Evaluation of Newcrest Mining Limited (NCM).
Evaluation of Newcrest Mining Limited (NCM) Prepared by: Sanjeev BHAKRI EXECUTIVE SUMMARY 3 2 INTRODUCTION 4 2.1 Objective of this Report 4 3 NEWCREST'S PRODUCTS, MARKETS & COMPETITION 4 3.1 Newcrest Mines - production figures for 2002 5 3.2 Competition 6 3.3 Management Performance 6 4 KEY FINANCIALS OF NEWCREST 7 4.1 Accounting Ratios 7 4.2 Financials Specific to the Gold Industry 9 4.3 Recent Economic Indicators 10 5 FUTURE PROSPECTS 13 6 FINANCIAL VALUATION METHODOLOGIES 14 7 SUMMARY OF FINDINGS 17 8 APPENDIX 1 - FINANCIAL DETAILS 19 9 APPENDIX 2 - GENERAL ECONOMIC CONDITIONS 23 EXECUTIVE SUMMARY Ever since the great California gold rush of 1848 Australian interest and enthusiasm for gold has been strong. Australia is the third largest producer of gold in the world accounting for 13% of the world total gold production. The importance of gold to the Australian economy is unquestionable. The economy benefits from the gold mining industry through contributions to government revenue in the form of mineral royalties, direct taxes such as company taxes, PAYE and indirect taxes such as stamp duty. Minerals Council of Australia estimates that Australian mining contributes $4.5 billion to State and Federal governments. It is also estimated that for every one person employed in the gold industry another 3.5 jobs are created elsewhere in the economy1. Newcrest is