Pine Street Capital

Overview of subject matter essential for the individual who requires general knowledge of the mutual fund industry and related topics. The individual may want to become a professional in the mutual funds industry or simply want to expand their knowledge of mutual funds for personal interest.

Current prices are listed and the current value of the cash portfolio representing purchasing costs at these prices is $-2,376,547.00. The portfolio values are most commonly thought of as positive values that include both revenue and input cost components. In Case 1, however, the portfolio is made up of only purchasing input cost components, without regard to revenue. Henceforth, the negative portfolio represents future expenses, and the risk considered is that input prices will increase, resulting in higher costs of purchasing. In the hedging strategies implicate forward or futures contracts, the current value of the cash portfolio is equivalent to Wo, the initial portfolio value, because the current values of entire futures contracts and forward contracts at initiation are zero. When lengthy positions in options are used, the premiums represent a primary outlay of funds that is added or subtracted from the current value of the cash portfolio in the equation for the primary portfolio value

Recent market developments have highlighted the 'Flight for Security ' of market participants by means of financial collateral. While cash represents the preferred source of collateral in 82% of all OTC derivatives transactions, it needs to be returned with interest to the collateral giver. At the same time this creates a re-investment risk for the collateral receiver. When accepting MMFs as collateral, collateral receivers are not exposed to any reinvestment risk because the fund offers competitive rates of returns. Compared to their

If you’re a hedge fund investor, chances are you’ve had a lot of bad news lately. Despite investors reduced return expectations the hedge fund industry has experienced some difficulties over the past few years. Hedge funds investors have withdrawn their money out of poorly performing funds. As a result, some of these firms’ assets will decline to the point where they are no longer profitable. Others have had a significant drawdown which will materially impair their ability to raise capital for the next several years. While it is true that the hedge fund industry saw the most outflows in the first quarter of 2016 since the second quarter of 2009. Despite all the negative stories about the industry, including some recent

In a diversified portfolio, in which risk is managed well, any losses that are incurred by certain assets will be offset in part by the gains of other assets. When risk is managed appropriately, hedge funds can be a robust addition to a portfolio.

mutual funds and thus the fund managers can pursue more advanced and a wider range of strategies

The article will give a brief overview of Hedge Funds and its strategy classifications. Then it will particularly describe “Event Driven” strategy and the market risks associated with it.

A hedge fund is a regulated investment fund that is typically open to a limited range of investors who pay a performance fee to the fund’s investment manager. Every hedge fund has its own investment philosophy that determines the type of investments made and strategies employed. In general, the hedge fund community undertakes a much wider range of investment and trading activities than traditional long-only investment funds. Hedge funds invest in a broader range of assets, including long and short positions in equity, bonds, commodities, and derivatives. Hedging out unwanted risk has been a common activity in the financial markets for centuries. In the 1800s, for example, commodity producers and merchants started using forward contracts to protect themselves against futures changes in commodity prices—these contracts hedged out the risk of adverse market fluctuations beyond their control. Such forward contracts are still traded to this day in the futures market. Alfred Jones is credited with the creation of the term “Hedge Fund” in 1949. He created A.W. Jones, a partnership with four friends, and through this vehicle he invested $100,000 in stocks, using both long and short positions. During the first year, the fund returned 17.3%. The idea has caught fire since.

The relationship is strict just for European-style choices yet the idea works for American-style alternatives in the wake of modifying for profits and intrigue rates. Dividends raise put values and diminish call values. If the profit is expanded, the puts terminating after the ex-profit date will ascend in esteem, while the calls will diminish by a comparable amount. Changes in financing costs have the inverse impact on put and call values. Rising loan fees increase call values and reduce put values.

A strategy of risk management is known as hedging. It limits or offsets probability of loss caused by fluctuations in the price of commodities, currencies, or securities. Consequently, hedging is a transfer of risk without the need of buying insurance policies. Hedging uses various methods.

This chapter gives a brief introduction to hedge funds and hedge fund data. Hedge funds are generally considered as private investment vehicles for wealthy individual and institutional investors. According to the National Securities Markets Improvement Act of 1996, participators are limited to at most 500 ‘qualified investors’, individuals who have at least $5 Million to invest in hedge funds and institutional investors with capital of at least $25 Million (Brown and Goetzmann, 2001). Normally, hedge funds are organized as limited partnerships, in which individual and institutional investors are limited partners and the hedge fund managers are general partners (Fung and Hsieh, 1999). To ensure the common economic benefit for investors and managers, hedge fund managers usually take a portion of their own wealth to invest in the funds. The fees charged by the investors consist of the fixed management fee and performance-based fee. The performance-based fee, which is significantly higher than fixed management fee, is paid to successful hedge fund managers. Although hedge funds influence the market dramatically, little about what they really do is understood publicly. Brown and Goetzmann (2001) state that the term ‘hedge fund’ seems to imply market neutral and low risk trading strategies, whereas hedge funds appear to have a high level of risk because of the extensive use of leverage.

This is an equity fund manager tasked with the responsibility of managing a portfolio. The portfolio comprises of largest UK stocks and thus bases the FTSE100 index (Battalio and Schultz 2011, Pp 45). There is much concern that sharp correction in equities might take place in the next 3 month. The main purpose of this report is to present the hedging choices that they have.

The first relates to the risk of the portfolio being affected by the market activity as a whole. A good example of this was with the financial crisis of 2008 which saw stock prices of all businesses including profitable ones dropping significantly. ’ (Saunders, A. et al. 2006)

This report is aimed at utilising hedging strategies to minimise the underlying risk of stock portfolio. During our simulation, we mainly implemented two strategies to hedge down-side risk, which were protective and put straddle. First of all, a discussion about implementing such two strategies in the trading process would be presented. After that, the outcome of our strategies would be analysed, including the gross profit and the net profit. Finally, we are going to seek the arbitrage opportunities based on the put-call parity. However, we were not able to capture these opportunities as a result of time restrictions. If no hedging strategies are used, it is likely to suffer a loss.

The report deals with Hedging concept, objectives and how Hedging carried out in index future and role of intermediaries etc. The outcome of the study shows hedging effectiveness in index future with the special reference to investors of karvy stock broking ltd are the advantages of hedging strategies giving by Karvy.