個案總覽

Investment manager James Franey confronts an apparent arbitrage opportunity during the global financial crisis of 2008 when he notices a wide yield spread between two U.S. Treasury bonds that mature on the same date. Franey must decide if there is an opportunity, how to structure a trade to exploit it, and how much of his fund's capital to allocate. Case exposition includes considerable detail on financing arrangements, particularly short-selling, margin lending, and repurchase agreements, that support relative-value strategies. Careful attention is paid to the bond math calculations that support the protagonist's analysis and decision. All quoted prices in the case are real and historical, and corresponding Bloomberg commands are provided for each as footnotes.

The B case briefly recounts the action that investment manager James Franey takes in the matter of two U.S. Treasury bonds with identical maturity dates but widely different yields. He must decide what to do next.

Investment manager Albert Mills confronts an apparent arbitrage opportunity during the global financial crisis of 2008 when he notices an unusually low-- and briefly negative-- thirty-year U.S. dollar fixed-floating swap spread. Mills must decide if there is an opportunity, how to structure a trade to exploit it, and how much of his fund's capital to allocate. Case exposition includes descriptions of fixed-floating swaps, important interest rates and spreads (LIBOR, TED spread, swap spread), and financing arrangements, particularly repurchase agreements, that support relative-value strategies. Attention also is paid to bond math calculations that support the protagonist's analysis and decision. All quoted prices in the case are real and historical, and corresponding Bloomberg commands are provided for each as footnotes.

The D case briefly recounts the action that investment manager Albert Mills takes in the matter of an unusually low U.S. dollar fixed-floating swap spread. He must decide what to do next.

Investment manager Eliza Baena confronts an apparent convertible bond arbitrage opportunity when she notices a narrowing spread between two Boston Properties (BXP) bonds, one a convertible bond and the other a straight bond, in the wake of the 2008 Lehman bankruptcy. Baena must decide if there is an opportunity, how to structure a trade to exploit it, and how much of her fund's capital to allocate. Case exposition includes descriptions of basic financing arrangements that support arbitrage strategies, such as rehypothecation and margin lending.

The B case briefly recounts the action that investment manager Eliza Baena takes in the matter of the Boston Properties (BXP) bonds described in the A case. She must decide what to do next.

Less than a month after the close of the merger between The Bank of New York and Mellon Financial, managers at the two firms realized that plans for combining their asset servicing businesses - and realizing the $180 million of annual cost savings that they had promised Wall Street - were fraught with risk. Senior executives must evaluate the seriousness of the risks and identify alternative ways of integrating the two firms, while safeguarding the technologies that process and clear a substantial fraction of the world's financial transactions. [Continues with "B" and "C" cases.]

[Continuation of "A" case.] Less than a month after the close of the merger between The Bank of New York and Mellon Financial, managers at the two firms realized that plans for combining their asset servicing businesses - and realizing the $180 million of annual cost savings that they had promised Wall Street - were fraught with risk. Senior executives must evaluate the seriousness of the risks and identify alternative ways of integrating the two firms, while safeguarding the technologies that process and clear a substantial fraction of the world's financial transactions. [Continues with "C" case.]

[Continuation of "A" and "B" cases.] Less than a month after the close of the merger between The Bank of New York and Mellon Financial, managers at the two firms realized that plans for combining their asset servicing businesses - and realizing the $180 million of annual cost savings that they had promised Wall Street - were fraught with risk. Senior executives must evaluate the seriousness of the risks and identify alternative ways of integrating the two firms, while safeguarding the technologies that process and clear a substantial fraction of the world's financial transactions.

Bob Kelly, the new CEO of Mellon Financial, is considering the terms of a proposed "merger of equals" with The Bank of New York, just before the final Board meeting to approve the deal. The combination offers a great strategic fit, and the expected synergies are large. However, the proposed exchange ration values Mellon at a discount to its last closing price, even though it is the smaller and non-surviving bank. Kelly must consider the various dimensions of the deal--specifically the value of synergies, the form of consideration, and the deal's impact on the eps of both sides--and determine whether it is in the best interests of Mellon, the city of Pittsburgh, and Mellon's shareholders.

Spreadsheet Supplement for case 208129