BUSI 3410U Lecture Notes - Lecture 10: Credit Default Swap, Nikkei 225, Brokerage Firm

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18 May 2017
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Shares are mainly held in street name: canadian depository for securities (cds, brokerage firm accounts. Sho(cid:396)t sale (cid:271)o(cid:396)(cid:396)o(cid:449) the sha(cid:396)e f(cid:396)o(cid:373) a (cid:271)(cid:396)oke(cid:396: buy them back at a lower price. For simplicity, we do not consider transaction costs, short selling costs and other costs. Co(cid:374)ti(cid:374)ge(cid:374)t (cid:272)lai(cid:373)s se(cid:272)u(cid:396)it(cid:455)"s pa(cid:455)off is dete(cid:396)(cid:373)i(cid:374)ed (cid:271)(cid:455) o(cid:396) is (cid:272)o(cid:374)ti(cid:374)ge(cid:374)t o(cid:374) that of othe(cid:396) se(cid:272)u(cid:396)ities. Ba(cid:396)i(cid:374)gs ni(cid:272)k leaso(cid:374)"s . (cid:1008) (cid:271)illio(cid:374) loss (cid:271)(cid:396)oke the (cid:271)a(cid:374)k. O(cid:396)a(cid:374)ge (cid:272)ou(cid:374)t(cid:455) it (cid:449)as (cid:271)etti(cid:374)g that i(cid:374)te(cid:396)est (cid:396)ates (cid:449)ould fall o(cid:396) sta(cid:455) lo(cid:449) Sub-prime mortgage problems exacerbated by derivatives (credit default swaps) Nick leason worked on the trading floor of singapore monetary exchange (simex) for barring. An account had been set up to cover up a mistake made by an inexperienced team member, which led to a loss of 20,000. Leeson now used this account to cover his own mounting losses.

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