Volatility Play on the Hidden Gold-Yuan Peg

Reserve Currencies A reserve currency is defined as a currency held by government for international payment purposes. The most important usages are: Repay back international debt (generally issued in reserve currencies) Defend the domestic currency against depreciation Improve the government credit rating Reserve currencies are many. The IMF chooses the most important ones to peg […]

A Primer on FX Carry Trading

Carry Trades and the Interest Parity Condition The uncovered interest rate parity (UIP) condition states that, under risk neutrality, the gain from borrowing a low interest rate currency and investing in a higher interest rate one will, in equilibrium, be matched by an equally large expected loss by a depreciation of the high interest rate […]

Market Recap 23/09/2018

US On Friday, the biggest revision (since 1999) in Global Industry Classification Standard took place. The new communications sector now include AT&T, Verizon, Century Link, Comcast, 21st Century Fox, Netflix, Walt Disney and, recent entrants, Alphabet and Facebook. Consequently, the Telecom sector which represented 2% of the S&P 500, will now represent 10%. According to […]

Renesas-IDT: the revamp of deals in the chipmaking industry

Renesas Electronics Corp. (TYO: 6723) – market cap as of 17/09/2018: ¥1.21tn Integrated Device Technology Inc. (NASDAQ: IDTI) – market cap as of 17/09/2018: $6.05bn Exchange rate: 1 JPY (¥) = 0.0089 USD ($) Introduction On September 11, 2018, Japanese Renesas Electronics Corp. (“Renesas Electronics”), a global player in the field of advanced semiconductor solutions, […]

Hot enough? Soft drink makers trying to get sexy again and The Coca-Cola Company’s $5.1 bn acquisition of Costa Coffee.

The Coca-Cola Company (NYSE: KO) – market cap as of 18/09/18: 196.23 bn Whitbread Plc (LON: WTB) – market cap as of 18/09/18; £ 8.61 bn   Introduction On the 31st of August 2018, The Coca-Cola Company announced that it had reached a definitive agreement to acquire Costa Limited, one of the major coffee brands […]

Keeping it in the Family: Natixis to Sell its Retail Banking Activities to BPCE

Natixis S.A. (EPA: KN) – market cap as of 14/09/2018: €18.43bn Introduction On September 12th, 2018 Natixis S.A. announced an agreement for the proposed sale of its retail banking activities to its parent BPCE. The transaction includes the transfer of the firm’s consumer financing, factoring, leasing, sureties and guarantees, and securities services businesses and is […]

Market Recap 06/05/18

US Over the course of this week several key US data were released. On Tuesday, the Institute for Supply Management’s Manufacturing PMI was released: it fell to 57.3 from the previous month’s 59.3 and missing market expectations of 58.3. On Wednesday, the Federal Open Market Committee (FOMC) left its target range for Fed Funds Rate […]

Liquidity Shocks: Fear in the Interbank Lending Market and its Effects

Introduction In this paper, we will try to explain what are the Euro Interbank Offered Rate (Euribor) and Euro OverNight Index Average (Eonia) rates, what drives the spread between them and specifically why this was the case during the 2008 financial crisis. Euro Interbank Offered Rate (Euribor) rates are the basis for the prices of […]

Increasing Correlation and Alternative Hedging

Correlation of 10y US Treasuries with Stock Market On April 25th, the yield on the 10-year US Treasury note broke above the psychologically important 3% threshold for the first time since 2014. The yield’s high for the day was 3.033%, meaning it was just short of 3.05%, which would have put it at the highest […]

Shareholders Activism: recent trends and strategies

Whitbread plc (LON:WTB) – market cap as of 04/05/2018: £7.84bn Introduction Conflicts of interest between shareholders and managers represent an old phenomenon and an inherent element of capitalistic governance systems. It stems from the fact that managers tend to profit from simply because their companies are getting bigger (through higher salaries, increased social standing, etc.) […]

A new class representative: Kroton to acquire Somos for $1.8bn

Kroton Educacional SA (BOVESPA: KROT3) – market cap as of 04/05/2018: R$ 21.75bn Somos Educação SA (BOVESPA: SEDU3) – market cap as of 04/05/2018: R$ 5.70bn Exchange rate: 1 BRL (R$) = 0.285 USD ($) Introduction On April 23, 2018, Kroton Educacional, the largest for-profit education company in Brazil, proceeded to acquire Somos Educação, a […]

Wooing it’s over in financial services: Fidessa has said yes to ION

Fidessa Group plc (LON:FDSA) – market cap as of 04/04/2018: £1.57bn Introduction  On April 20, the board of the UK software company Fidessa has agreed to a £1.5bn all-cash takeover offer from ION, an Ireland-based financial technology company backed by The Carlyle Group. The announcement comes after Fidessa had agreed to be acquired by the Swiss peer […]

Market Recap 29/04/2018

US This week, US equities have shown an increase in volatility: on Tuesday 24th, following the breakthrough of the psychological barrier of 3% in the yield of 10y US treasuries, the most important US indexes S&P 500/DOW JONES 30 and Nasdaq 100 have lost about 2% each. On the same day, the VIX, the index […]

US vs China: Who is Going to Ship more?

Introduction Trade wars and tit-for-tat tariff threats between the two largest national economies should not be expected in a world embracing trade integration and common regulation through institutions such as the World Trade Organisation (WTO). However, this is exactly what we are currently observing in a US-led, politically motivated upheaval against Chinese trade practices, that […]

Veni, Vidi, Vici: The Blackstone Way To Trade CDS

The CDS Market Until 2008, credit default swap (CDS) markets have grown exponentially since their emergence in the late 1990s but shrunk considerably to an estimated outstanding notional value of $9.6 trillion in 2017. Despite deliberate efforts by the International Swaps and Derivatives Association (ISDA) and market participants on both buy and sell sides, the […]

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