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Hedge Fund Strategies (9) – Asset Swaps

Hedge Fund Strategies (9) – Asset Swaps

Let us resume our tour of hedge fund strategies based on different types of fixed income arbitrage. An asset swap is an over-the-counter agreement between two counterparties to exchange fixed-rate interest payments for floating-rate interest payments.  The fixed portion is a position in a fixed-rate loan, such as government or corporate bonds.  The floating-rate portionRead more about Hedge Fund Strategies (9) – Asset Swaps[…]

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Copyright 2011 Eric Bank, Freelance Writer
Hedge Fund Strategies (6) – Fixed Income Arbitrage and Spread Trades

Hedge Fund Strategies (6) – Fixed Income Arbitrage and Spread Trades

[icopyright horizontal toolbar] Fixed Income Arbitrage (FIA) is the name given to a family of trading strategies that, to various extents, use spread trades on debt instruments to take advantage of pricing inefficiencies independent of overall market direction.  A spread trade is the simultaneous purchase and shorting of related securities (and their derivatives) in theRead more about Hedge Fund Strategies (6) – Fixed Income Arbitrage and Spread Trades[…]

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Copyright 2011 Eric Bank, Freelance Writer
Regulations Pertaining to Securities Lending

Regulations Pertaining to Securities Lending

Under the Federal Reserve’s Regulation T, a security can be loaned at a minimum of 100% of its value for a permissible purpose. The purposes are to cover shorts, assure settlements or to loan to another.

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Copyright 2011 Eric Bank, Freelance Writer
Dividend and Interest Accrual

Dividend and Interest Accrual

Many trading firms, especially ones that are not self-clearing, use prime brokerages to maintain accounting books and records on the trading firm’s behalf. Accrual accounting is used: items are recognized when they are earned and expenses recognized when they are incurred. Because accrued-based accounting is used, in some cases accruals are set up in theRead more about Dividend and Interest Accrual[…]

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Copyright 2011 Eric Bank, Freelance Writer
The Three Vital Prime Brokerage Reports

The Three Vital Prime Brokerage Reports

While all hedge funds require financing, some perform their own clearing operations, while others hire a prime broker to perform administrative tasks. In today’s blog, we’ll discuss the three main administrative reports that prime brokers provide to their clients who are not self-clearing.

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Copyright 2011 Eric Bank, Freelance Writer
Securities Lending, Part Three

Securities Lending, Part Three

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In Part Two of this series, we documented how fees, dividends and defaults  relate to securities lending by prime brokers. In this installment, we’ll discuss how counterparties transfer securities between borrower and lender.

Transfers are either physical, by way of a clearing organization, or by other means agreed upon between the counterparties.  Physical transfers must be delivered along with duly executed stock or bond transfer powers with guaranteed signatures by a bank or member firm of the New York Stock Exchange.

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