Premium Essay

Hedge Fun Guru Suffers Wipeout

In: Business and Management

Submitted By patricia33333
Words 674
Pages 3
Caso Practico N. 2
HEDGE FUN GURU SUFFERS WIPEOUT

1.a. Grafique el payoff de la estrategia que empleo Niederhoffer.

1.b. Por qué Niederhoffer ejecutó la estrategia descrita; eso es, como él esperaba hacer dinero dado su punto de vista sobre el índice S&P?

Porque especuló que los gestores de los fondos debieron de vender bastantes put/call y tomar en demasía la opción Premium así como generar un retorno mayor a lo tomado inicialmente por los especuladores de fondos.
Esta estrategia que representa el operar con derivados: la venta de opciones. Niederhoffer es un conocido vendedor de opciones, y al menos una parte importante de sus quebraderos de cabeza se explican por ventas de opciones que acabaron mal. La venta de opciones es sencillamente demasiado tentadora y muchos no son capaces de resistirse. Esa tentación suele cegar a los inversores acerca de los (muy substanciales) riesgos potenciales que pueden esperar en el futuro.
La venta de opciones resulta ser tentadora porque permite generar un flujo constante de dinero (la prima de las opciones vendidas) por lo que podría ser un muy largo periodo de tiempo, ayudando por tanto a producir retornos muy jugosos. Por ejemplo, una estrategia típica (practicada por Niederhoffer, entre otros) es vender puts muy fuera del dinero. Si bien la prima obtenida sería relativamente inferior (dado que el precio del activo subyacente debería disminuir mucho para que el comprador de la opción obtenga un payout), tan sólo una crash en el mercado te ocasionaría problemas serios. Mientras que el subyacente se comporte “normalmente”, puedes continuar tranquilamente acumulando primas y apareciendo como un genio ante el mundo exterior.
1. c. Por qué la estrategia perdió tanto dinero?
Porque la decisión de vender opciones debe por tanto estar basada en supuestos probabilísticos sólidos. Si…...

Similar Documents

Premium Essay

Hedge Funds

...Title: A Hedge Fund manager’s New Groove Date: November 2, 2010 Section: Money and Investing methodology According to the Wall Street’s journal article, a former manager of hedge funds has made a lot of money by switching to the high long term decision from his shorting stock. William Von Mueffling made a surprising announcement by saying that he would close his hedge funds and return about $3.5 billion to investors. Williams Muefflling’s firm contillion capital management of New York only managed an unattractive piece of business of business worth $1 billion in long only assets for a very long period of time. Due to his fortune he currently manages more money than he did while he was a hedge fund manager. According to the article, the former hedge funds manager has raised billions of dollars in the U.S financial market and foreign financial markets from pension funds investment. His investments saw 21% returns increase this year which has helped to boost his overall assets to about $5 billion. Contillion capital management is now a firm that charges lower fees with attended process of investment. William Von Mueffling and his other financial analyst now choose to invest and stick to the company’s stocks that they believe will grow rather than betting against stocks. According to the former, hedge funds manager, he says that this is the right long term decision which he just made. He believes that although there are some stocks which are overvalued, trying to short term...

Words: 786 - Pages: 4

Free Essay

Fun Fun Fun

...FUN UNLIMITED PACKAGE! Step out and have Fun on an Eco-farm…….. Rolling Hills Farm near Kanakapura, located 45 kms from Bangalore in Devarahalli Village, near Maralvadi in Kanakpura Taluk offers an exciting farm-stay and a great outdoor experience on a coconut farm. Set against a range of rocky hillocks, the farm has a petting zoo for kids and wide open spaces for youngsters to play games and dabble in adventure activities. Run by the professional team that offers an amazing wilderness & adventure experience at Riveredge Paradise Resort at Karwar for close to a decade, Rolling Hills offers families and youngsters a great day out to recharge. Day Package: Cost of a FUN UNLIMITED day trip package (8:00 AM to 6:00 PM). * Rs. 1500 per adult (12 years and above) * Rs. 750 per child (Ages 5-12) * Ages 5 and below – free food, but no adventure activities are included in this package. Package Includes: * 1 Buffet Breakfast, 1 Buffet lunch,1 Tea with cookies & snacks * Use of Archery equipment with instructions. * A trek to nearby rock for Rock-climbing/ Rappelling with instructions. * 2 rounds of the track on the All Terrain Vehicle (ATV) * Unlimited use of outdoor sports equipment like darts, badminton, cricket and volley ball. * Feeding and petting of farm animals. * Any other Adventure Activities are not a part of this package and will be charged extra if used. Note: All other expenses of......

Words: 437 - Pages: 2

Premium Essay

Hedge Fund

...Hedge Funds Case Study in Ming Teng's course Hedge Funds, an industry that has experienced rapid growth since mid-1990s, control $2 trillion of investable assets, the number more than a quarter of total mutual funds’ assets, making hedge funds a growing influential power today. Institutional and private investors invest in hedge funds because they expect that hedge funds are more likely to produce higher return compared with traditional investment vehicles, such as mutual funds. More important, hedge funds pursue absolute return. Compared with benchmarking method, absolute return is critical for institutional investors that publish financial statements quarterly or yearly, particularly under low interest rate environment. Hedge funds can make money by deploying certain strategies, such as Long/ Short Equity (Appendix 1). To make their strategies successful, hedge funds must possess greater capabilities in the field they choose. For example, research is critical to know the fair value of a company’s stock, and hedge funds must invest heavily on related experts. Hedge funds are much more flexible compared with mutual funds. Hedge funds can have long or short position, and some hedge funds are highly leveraged (Appendix 2). On the other hand, information for hedge is often obscure, and investors must be very very cautious about the integrity of the hedge fund company. (Madoff Ponzi scheme) Management fee structure certainly affects the performance of a hedge fund...

Words: 621 - Pages: 3

Free Essay

Status Guru

...yang baik membutuhkan guru-guru yang benar-benar memiliki ketanggapan yang berlandaskan kearifan (informed responsiveness) terhadap kemungkinan masalah-masalah yang dihadapi kepada guru-guru yang profesional masa depan bangsa dan negara dapat dipercaya. B. Perkembangan Profesi Keguruan Dalam buku Sejarah Pendidikan Indonesia, Nasution (1852) menjelaskan sejarah pendidikan di Indonesia terutama dalam zaman kolonial Belanda, termasuk juga sejarah profesi keguruan. Guru-guru yang pada mulanya diangkat dari orang-orang yang tidak didik secara khusus menjadi guru, secara berangsur-angsur dilengkapi dan ditambah dengan guru-guru yang lulus dari sekolah guru yang didirikan di Solo tahun 1852. Kebutuhan guru yang mendesak maka pemerintah Hindia Belanda mengangkat lima macam guru yakni: 1) Guru lulusan sekolah guru 2) Guru bukan lulusan sekolah guru 3) Guru bantu yang lulus ujian guru bantu 4) Guru yang dimagangkan kepada guru senior 5) Guru yang diangkat karena keadaan yang mendesak Sekolah guru dimulai dan kemudian didirikan sekolah normal, namun pada mulanya bila dilihat kurikulumnya dapat kita katakan hanya mementingkan pengetahuan yang diajarkan saja. Ke dalamnya belum dimasukkan secara khusus kurikulum ilmu mendidik dan psikologi. Keadaan yang berlanjut hingga zaman pendudukan Jepang dan awal perang kemerdekaan, walaupun dengan nama dan bentuk lembaga pendidikan guru yang disesuaikan......

Words: 1286 - Pages: 6

Premium Essay

Hedge

...organisation. In the world of sports betting this can mean covering a bet you have made on team A by backing team B at some point in the contest to ‘hedge’ your position. In finance there are numerous strategies used, a number of which I will explain later. The goal of a hedge fund is to generate positive returns no matter what the market does. A hedge fund can be described as an “actively managed private investment fund that seeks positive attractive returns”. Frush, Scott. (2006). Understanding Hedge Funds. Ann Logue differentiates them from other investment tools, “They differ from so called ‘real money’ traditional investment accounts such as mutual funds, pensions, endowments and so forth, because they have more freedom to pursue different investment strategies”. Logue, Ann C. (2006). Hedge Funds For Dummies. This comment is valid as for the most part they are not as heavily regulated as other investment institutions. In his book Investing in Hedge Funds (2005), Joseph Nicholas asserts that in days gone by the term hedge fund is actually used to describe both a structure that is “a co-mingled investment fund” and a strategy. Today, however he argues that it is best describes the context of the structure of the investment and the strategy used to help the strategy come to fruition. Similar to most private equity funds hedge funds are set up as limited liability companies or partnerships to protect investors from being exposed to losses more than their initial......

Words: 2210 - Pages: 9

Premium Essay

Hedge Fund

...Gregory Connor and Mason Woo An Introduction to Hedge Funds Introductory Guide 1 Introduction International Asset Management (‘IAM’) is the proud sponsor of the IAM Hedge Fund Research Programme of the Financial Markets Group. Within this programme the LSE team undertakes independent research into aspects of the hedge fund industry. It is hoped that the results of this research will give greater understanding about this growing area of financial innovation. This research paper gives a broad introduction to the hedge fund industry, the historical background to the evolution of hedge funds, the fund of funds industry and provides an explanation of some of the terminology used within this area. As an overview of the industry the document does not attempt to address the use of hedge funds within the broader context of portfolio management such as organisational risk or other areas of concern for the investor. This is a nontechnical paper and as such is intended for students or practitioners seeking a general introduction and reference tool. It is not a survey of the research literature and citations are kept to a minimum. If you wish to keep updated on the IAM Hedge Fund Research Programme please let us know. If you have any questions please contact IAM at our London office or visit our website: 34 Sackville Street London W1S 3EF Tel. +44 (0)20 7734 8488 www.iam.uk.com For information about the research activities of the Financial Markets Group see the following......

Words: 10299 - Pages: 42

Premium Essay

Currency Hedge

...Main details about the Currency Hedge Case: * John will buy 8,000 cases for € 1,030,000 * John will sell all 8,000 cases for $199 for each case ($ 1,592,000) * Spot Exchange Rate is $1.32/ € * The Forward rate for November is $1.37/ € * The Forward rate for December is $1.39/ € * Forward contracts can be bank forward rate of the month * Future contract can be multiple of $ 62,500, expiring 3rd Friday of each month. * November option can be multiple of $62,500 buying the $ 1.37/€ costing 3 cents per Euro. * December option can be multiple of $62,500 buying the $ 1.39/€ costing 3 cents per Euro. * Euro Interest per three months in annual rate 6% * Dollar Interest per three months in annual rate 6.5% PART I FORWARD HEDGE € 1,030,000 ($ 1.37) = 1,411,100 November € 1,030,000 ($ 1.39) = 1,431,700 December Differences in the Forward rates for November Spot Ex Rate | Unhedget Position | Forward Hedge | Gain or losses | 1.22 | 1,256,600 | 1,411,100 | 154,500 | 1.32 | 1,359,600 | 1,411,100 | 51,500 | 1.37 | 1,411,100 | 1,411,100 | 0 | 1.42 | 1,462,600 | 1,411,100 | -51500 | 1.52 | 1,565,600 | 1,411,100 | -154,500 | Differences in the Forward rates for December Spot Ex Rate | Unhedget Position | Forward Hedge | Gain or losses | 1.24 | 1,277,200 | 1,431,700 | 154,500 | 1.34 | 1,380,200 | 1,431,700 | 51,500 | 1.39 | 1,431,700 | 1,431,700 | 0 | 1.44 | 1,483,200 | 1,431,700 | -51,500 | 1.55 | 1,586,200 |......

Words: 910 - Pages: 4

Premium Essay

Hedge Funds

...Do Hedge Funds Have Enough Capital? A Value-at-Risk Approach * Anurag Gupta† Bing Liang‡ April 2004 ____________________________________ *We thank Stephen Brown, Sanjiv Das, Will Goetzmann, David Hseih, Kasturi Rangan, Peter Ritchken, Bill Sharpe, Ajai Singh, Jack Treynor, and two anonymous referees for comments and suggestions on earlier drafts, and the seminar participants at Case Western Reserve University, University of Massachusetts at Amherst, Virginia Tech., the 2003 European Finance Association Meetings in Glasgow, the 2003 Western Finance Association Meetings in Los Cabos, the 2003 QGroup fall seminar in Scottsdale, the 2001 FMA European Meetings in Paris, and the 2001 FMA meetings in Toronto. Bing Liang acknowledges a summer research grant from the Weatherhead School of Management, Case Western Reserve University. We also thank TASS Management Limited for providing the data. We remain responsible for all errors. †Department of Banking and Finance, Weatherhead School of Management, Case Western Reserve University, Cleveland, OH 44106. Phone: (216) 368-2938, Fax: (216) 368-6249, E-mail: anurag.gupta@case.edu. ‡Department of Finance and Operations Management, Isenberg School of Management, University of Massachusetts, Amherst, MA 01003. Phone: (413) 545-3180, Fax: (413) 545-3858, E-mail: bliang@som.umass.edu. Do Hedge Funds Have Enough Capital? A Value-at-Risk Approach Abstract We examine the risk characteristics and capital adequacy of hedge funds......

Words: 11176 - Pages: 45

Premium Essay

Hedge Fund

...Cayman Islands Guide to Hedge Funds Introduction From offices in the British Virgin Islands, the Cayman Islands, Dubai, Dublin, Hong Kong, Jersey, London and Singapore, Walkers provides legal services to FORTUNE 100 and FTSE 100 global corporations and financial institutions, capital markets participants, investment fund managers and middle market companies. Walkers' Cayman office has an international reputation as the leading hedge fund and private equity fund practice in the Cayman Islands, advising the best-known asset managers, promoters and institutional investors in the investment world for five decades. Our global presence means we are always open and accessible to our clients – in all time zones. The purpose of this Guide is to offer a comprehensive, commercial and concise guide to the key aspects of structuring and establishing an offshore hedge fund – starting with a broad overview of hedge fund structures, and concluding with a short section on listing. We have also addressed some of the defensive mechanisms that can be deployed to stabilise a hedge fund in difficult times, including a section on the use of synthetic side pockets and side letters. The Guide is not a substitute for seeking appropriate onshore and offshore commercial and legal advice and should not be relied on in this manner. Introduction to hedge fund vehicles The key constitutional features of hedge funds to address from an offshore perspective are three-fold: 1. 2. 3. the types of vehicle......

Words: 15709 - Pages: 63

Premium Essay

Hedge Funds

...Hedge Funds Instructor: Dr. F. Beer By: Vishal Pahuja | Angel Cardoz | Contents Introduction by Vishal Pahuja 3 History by Vishal Pahuja 4 Types of Hedge Funds by Vishal Pahuja 4 Key Characteristics of a Hedge Funds by Vishal Pahuja 5 Size and Market Statistics by Angel Cardoz 5 What is the Cost? by Angel Cardoz 6 Cost to manage 6 Cost to Economy 7 Risks and Returns by Vishal Pahuja 7 Hedge Fund Structure by Vishal Pahuja 8 A Success Story by Vishal Pahuja 9 Peer Evaluation 9 Pay for Hedge Fund Managers 9 A Failure Story by Angel Cardoz 10 Long-Term Capital Management 10 The Rise 10 The fall 10 The future of hedge funds by Angel Cardoz 11 Regulation 11 Markets 11 Bibliography by Vishal Pahuja 11 Quote Basically, I look at the trading screens all day and go with my gut. Hedge Funds Introduction S ince the early 1990s, hedge funds have become an increasingly popular asset class. The amount invested globally in hedge funds rose from approximately $50 billion in 1990 to approximately $1 trillion by the end of 2004 And because these funds characteristically use substantial leverage, they play a far more important role in the global securities markets than the size of their net assets indicates. Market makers on the floor of the NYSE have estimated that during 2004, trades by hedge funds often accounted for more than half of the total daily number of shares changing hands. Moreover, investments in hedge funds have......

Words: 4009 - Pages: 17

Premium Essay

Hedge

...To: | George Saoud | From: | Peter Zarin | CC: | Stephen Heath, George Saoud and Salesh Nischal | Date: | Xxxxx | Re: | Hedge Accounting – Designation and Effective Testing as at 30 June 2015 | Executive Summary In Q4 FY15, FHL Group decided to elect to adopt IFRS 9 Hedge Accounting which will enable the Group to more effectively mitigate the adverse foreign exchange movements involved with importing of raw materials and finished goods for our leading retail business units, c $120M per year. The identification of foreign exchange risk has been formally identified as a key financial risk to the Group and as such compliments this decision to adopt hedge accounting as a method by which to minimise the volatility of the AUD against the USD contracts. The risk likelihood and impact are considered high in both cases. FHL has chosen to hedge with Forwards Exchange Contracts to hedge the foreign exchange risk. A forward contract is a contract to exchange a fixed amount of f financial assets on a fixed future date at a fixed price. The fair value of a forward contract is affected by changes in the spot rate and changes in the forward points. Although the Group has used forward contracts in the past, the adoption of IFRS 9 Hedge Accounting has not been applied because the tenure of the contracts was hedging against AUD/USD FX rates three months out from the accounting period. The Board has decided that the tenure should now look prospectively 6 months out which......

Words: 1216 - Pages: 5

Premium Essay

Career Guide to Hedge Funds

...FUND CARE VAULT CAREER GUIDE TO HEDGE FUNDS © 2007 Vault, Inc. HEDG FUND VAULT CAREER GUIDE TO HEDGE FUNDS ADITI A. DAVARE, HOLLY GOODRICH, MICHAEL MARTINEZ AND THE STAFF OF VAULT © 2007 Vault, Inc. Copyright © 2007 by Vault Inc. All rights reserved. All information in this book is subject to change without notice. Vault makes no claims as to the accuracy and reliability of the information contained within and disclaims all warranties. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, for any purpose, without the express written permission of Vault Inc. Vault, the Vault logo, and “the most trusted name in career informationTM” are trademarks of Vault Inc. For information about permission to reproduce selections from this book, contact Vault Inc., 150 West 22nd St, New York, New York 10011, (212) 366-4212. Library of Congress CIP Data is available. ISBN 10: 1-58131-534-1 ISBN 13: 978-1-58131-534-9 Printed in the United States of America ACKNOWLEDGMENTS Vault’s acknowledgments: Thanks to everyone who had a hand in making this book possible. We are also extremely grateful to Vault’s entire staff for all their help in the editorial, production and marketing processes. Vault also would like to acknowledge the support of our investors, clients, employees, family, and friends. Thank you! Table of Contents INTRODUCTION 1 What is a Hedge Fund? . . . . . . . . . . .......

Words: 59940 - Pages: 240

Premium Essay

Hedge Funds

...Hedge Funds: A liability for the economy? Sander van Bentum 362107 Max Wielitsch 385533 Dhr. B. Tims 17-10-2013 Table of Contents Introduction 3 Risks for the investors 4 The creation of risks to financial institutions 5 The excess volatility risk 6 Transparency 6 Unlevel playing field 7 Hedge funds and financial bubbles 7 The role of hedge funds in crises 8 Conclusion 10 Bibliografy 10 Introduction Everybody that is somewhat involved with finance has probably at some point heard of the term hedge fund. But what is it exactly? In simple words it can be described as, ‘’an actively managed, pooled investment vehicle that is open to only a limited group of investors and whose performance is measured in absolute return units’’ (Connor et al. 2003). This limited group of investors contain wealthy investors who would be able to cope with possible losses. Commonly hedge funds make use of arbitrages and price discrepancies, terms that are also known as inefficiencies within the market. By making small profits on a large scale by identifying these market inefficiencies and attempting to correct them these hedge funds claim to help the market become more efficient. Hedge Funds first made their appearance on to the global financial stage in 1949, when the first hedge fund was created by Alfred W. Jones. ‘’He raised $60,000 and invested $40,000 of his money to pursue a strategy of investing in common stocks and hedging the positions with short......

Words: 2952 - Pages: 12

Premium Essay

Hedge Fund

....................................  1   INTRODUCING  HEDGE  FUNDS  ............................................................................................................................................  2   ORIGINS  OF  HEDGE  FUNDS  ..................................................................................................................................................  3   STRUCTURES  OF  HEDGE  FUNDS  ........................................................................................................................................  6   ROLE  OF  PRIME  BROKERS  ...................................................................................................................................................  9   FEE  STRUCTURES  OF  HEDGE  FUNDS  ..............................................................................................................................  11   MAJOR  HEDGE  FUNDS  .........................................................................................................................................................  13   BALANCE  SHEET  OF  A  HEDGE  FUND  ..............................................................................................................................  14   INCOME  STATEMENT  OF  A  HEDGE  FUND  ...................................................

Words: 22449 - Pages: 90

Premium Essay

Hedge Fund

...Hedge Funds 1. Hedge Funds Versus Mutual Funds Mutual funds are regulated under the SEC Act 1933 and the Investment Company Act of 1940 and they must invest according to the stated goals in the prospectus. They are adjured to avoid ‘style drift.’ Hedge funds are not open to the general public. The primary investors are institutional investors but they are open to high net worth individuals. Most require minimum investments of $250,000, some go up to $1,000,000. A few now have a minimum investment of $25,000, but we will have to wait and see what kind of shakeout occurs after the financial crisis. The following table provides a summary of the differences between hedge funds and mutual funds. Characteristic | Mutual Funds | Hedge Funds | Transparency | Public info on portfolio composition | Info provided only to investors | Investors | Unlimited | < 100, high dollar minimums | Strategies | Must adhere to prospectus, limited short selling & leverage, limited derivatives usage | No limitations | Liquidity | Redeem shares on demand | Multiple year lock up periods typical | Fees | Fixed percentage of assets; typically 0.5% to 2% | Fixed percentage of assets; typically 1% to 2% plus incentive fee = 20% of gains above threshold return | Notes to the table: Some mutual funds can engage in short selling, but not to the extent that hedge funds can. The lock up period employed by some hedge funds allows the funds to invest in less liquid......

Words: 1577 - Pages: 7

Trainspotting Choose Life T-Shirt Black | Regleta Slim Led Extra Plana 60Cm 120Cm Luz 6000K 4000K 3000K | 4x12 Jane the Virgin