Tottenham Hotspur Football Club is a publicly-owned professional soccer team based in London, England. The club's chairman, Daniel Levy, is contemplating a significant investment in physical assets, including the development of a new stadium as well as the acquisition of a new player. The team must decide if the expected cash flows associated with adding the stadium, the player, or both, warrant the considerable required investments in these assets.
This case examines currency risks faced by Microfinance Institutions, and evaluates strategies to hedge them in countries with pegged currency regimes and no derivatives markets. An MFI based in Western Samoa borrows in different currencies like the US dollar and the New Zealand dollar is worried about the additional variability in its cash flows due to unexpected currency fluctuations, and wants to explore strategies to hedge this risk in the absence of a derivatives market for the Samoan Tala. It seems to the president of the company that borrowing in different currencies, in proportions equal to the weights of the currencies in the basket peg, would reduce the currency risk. He wants to estimate the exact weights of the currencies in the basket peg and measure the reduction of currency risk using this strategy.
This lesson develops the classical structural approach to pricing and hedging credit risk: Merton's (1974) contingent claims model of debt and equity claims. This model is used to make investment and risk management decisions in an over-the-counter (OTC) market for distressed bonds.
This lesson integrated Merton's (1974) contingent claims model of debt and equity claims with the CAPM, which allows us to examine the risks and pricing of credit portfolios, and the derivative claims issued against them. In particular, this model is used to make investment and risk management decisions in the market for collateralized debt obligations (CDOs).
The event arbitrage module includes two simulation sessions. The first simulation focuses on analyzing and evaluating individual merger transactions, while the second simulation emphasizes managing a portfolio of individual positions and the limitations of arbitrage investing in real world capital markets. The underlying data and information are derived from actual merger transactions and have been disguised to prevent students from knowing the outcome ahead of time.
Describes a practical method for asset allocation that is more robust to estimation errors than the traditional implementation of mean-variance optimization with sample means and covariances. The Bayesian inspired Black-Litterman model is described after introducing the intuition of the Bayesian approach to inference in a univariate setting.
Focuses on the portfolio allocation decision of a passive fund manager. Provides a setting to study portfolio theory, including mean-variance analysis, the capital market line, and the efficient frontier.
Williams, a Tulsa, Oklahoma-based firm in various energy businesses, must decide whether to accept a financing package offered by Berkshire Hathaway and Lehman Brothers. The proposed one-year credit facility would provide the firm with financial resources in a difficult period.