11S.01.Informal_introduction-student

11S.01.Informal_introduction-student - FIN 600 Lecture 1...

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FIN 600 – Lecture 1 Financial Crisis and An Informal Introduction to Finance Dr. Zhipeng (Alan) Yan
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Financial Crisis: 2007-09 ± Crisis: “When written in Chinese, the word "crisis" is composed of two characters. One represents danger and the other represents opportunity ± This underscores the tradeoff that investors and business managers must make between reward and risk .
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Danger – Big Casualties ± Bear Sterns: 85 years old. - Sold - agreed to be sold to JPM on March 16,2008 - “Poor, smart and with a deep desire to be rich” ± Lehman Brothers: 158 years old. - Died - U.S. investment bank and capital-markets businesses were bought by UK’s Barclays - “Where Vision Gets Built” ± Merrill Lynch: 94 years old. - Sold - sold to Bank of America. - the world's largest stockbroker -16,000 brokers - "We See Your Financial Life in Total" ± AIG: 89 years old – Seized by Gov - the largest underwriters of commercial and industrial insurance - “We know money” Buying a house is not the same as buying a house on fire.
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Financial Institutions ± Commercial banks : raise money from depositors and then make loans to businesses and individuals. ± Investment banks : do not take deposits, do not make loans. They advise and assist companies in raising financing. Sadly, traditional 5 largest I-banks disappeared in this crisis. ± Insurance Companies : ² Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for a premium , and can be thought of as a guaranteed and known small loss to prevent a large, possibly devastating loss. ² An insurer is a company selling the insurance; an insured or policyholder is the person or entity buying the insurance. ² They are more important than banks for the long-term financing of business. WHY?
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Opportunities – 2008 (Top Hedge Fund Managers) ± 1 James Simons, Renaissance Technologies Corp. , $2.5 billion ± 2 John Paulson, Paulson & Co. , $2 billion (made 3.7 billion in 2007) ± 3 John Arnold, Centaurus Energy, $1.5 billion ± 4 George Soros, Soros Fund Management, $1.1 billion ± 5 Raymond Dalio, Bridgewater Associates , $780 million ± 6 Bruce Kovner, Caxton Associates, $640 million ± 7 David Shaw, D.E. Shaw & Co. , $275 million ± 8 Stanley Druckenmiller, Duquesne Capital Management, $260 million ± 9 David Harding, Winton Capital Management , $250 million ± 9 Alan Howard Brevan. Howard Asset Management, $250 million ± 9 John Taylor Jr. , FX Concepts, $250 million
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Mutual Fund (MF) vs. Hedge Fund (HF) ± MF: pooled investment and invest in publicly traded securities ± Small guys ± Registered with SEC ± Seek relative returns ± Long-only (buy/sell decisions) ± No or low leverage ± No or low appetite for high- risky assets ± Asset under management: 11.6 trillion (Aug,08) ± HF: pooled investment and invest mostly in publicly traded securities ± Big guys: accredited investors, rich individuals and institutions ± not registered with SEC ± Seek absolute return ± Long-short, derivatives.
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This note was uploaded on 03/18/2011 for the course FIN 615 taught by Professor Yan during the Spring '11 term at New York Institute of Technology-Westbury.

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11S.01.Informal_introduction-student - FIN 600 Lecture 1...

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