Cornell_Swap_Teach_In_9-21_v1 - Swaps Teach In Scott...

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fLD0152_screenshow.ppt Swaps Teach In Scott Carter, Cornell MBA ‘95
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2 Scott Carter, Cornell MBA ‘95 Scott J. Carter is a Managing Director in Global Prime Finance at Deutsche Bank. He is Head of Sales and Capital Introduction for North America and Co-Global Head of Hedge Fund Consulting. Scott joined Deutsche Bank via the merger with Bankers Trust. He began at the firm in 1995 covering US Pension plans for fixed income derivative products, including Synthetic GIC's. In 1998, he took on a role as senior structurer for the hedge fund derivatives business and helped develop Deutsche Bank's market leading platform in principal protected and leveraged hedge fund products over the next few years. In 2001, Scott joined Global Prime Finance and is now Head of Sales and Capital Introduction in the Americas as well as Co-Global Head of Hedge Fund Consulting. These coverage teams are responsible for sales, relationship management, capital raising and consulting for the firm's global prime brokerage and swap business - Global Prime Finance. Prior to joining Deutsche Bank, Scott worked at CSFB from 1990 to 1993 as an assistant trader in MBS Trading. He holds a BS in Finance from The University of Rhode Island and an MBA from The Johnson Graduate School of Management at Cornell University.
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3 Table of Contents I. Introduction to Swaps and Mechanics I. Reasons for trading on swap I. Trade examples
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4 What is a Total Return Swap? An OTC contract between a bank / broker dealer and the Investor Equity Swaps are contracts where: 2 parties agree to exchange specific cash flows over a defined period of time: -Equity leg: payment based on the price appreciation or depreciation of a specific underlying asset plus dividends and other distributions -Interest leg: an interest payment based on the “notional amount”- the market value of the financed asset A “total return swap” replicates the performance of an underlying security, index, or basket of securities
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5 Basics of a Total Return Swap Trade Structure Total Return Payer Synthetically Short Performance Change in Value Plus Dividends / Coupons / Distributions Financing Calculated Based On Notional Total Return Receiver Synthetically Long
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6 Portfolio Swap (PSA) Deutsche Bank’s market-leading total return swap platform Portfolio Swaps allow investors to get long or short exposure to multiple single names and baskets in an operationally efficient manner. The Portfolio Swap structure offers: • Paperless confirmations executed over the web • Synthetic execution and leverage Improved operational efficiency • Less regulatory filings • No physical security settlement • Multiple bookings under a single trade record • Consolidated resets and payments At Risk - Deutsche Bank takes market risk setting the hedge - Complete separation between swap and hedge - Examples of acceptable risk taking are VWAP, TWAP
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7 Portfolio Swap Example : Client Long 500k shares Amazon (short) Total Return 500k Shares AMZN 1M Libor + 40bps Client (long) Treasury Market
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This note was uploaded on 01/25/2011 for the course NBA 6940 at Cornell University (Engineering School).

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Cornell_Swap_Teach_In_9-21_v1 - Swaps Teach In Scott...

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