An Introduction to Investment Banks, Hedge Funds, and Private Equity: The New Paradigm by Stowell David

Author:Stowell, David [Stowell, David]
Language: eng
Format: mobi
Publisher: Academic Press
Published: 2010-02-15T16:00:00+00:00

Questions

Which two core hedge fund activities can either create incremental risk or act as a risk mitigator?

Explain the importance of hedge funds to investment banks, including revenue, types of business, and which division is most relevant. In addition, with which investment banking areas do hedge funds principally compete?

Suppose a hedge fund manager buys $15 million of ABC shares on 20% margin. The maximum allowable leverage ratio is 4.0×. The next day, unexpected negative news about ABC is released and its stock closes down 7%. One day later, the hedge fund's prime broker notifies the manager that leverage ratios now need to come down to 3.0×. What percentage of the original balance of ABC shares is left in the investment fund at the end of the day after selling shares to comply with the new leverage requirement? Assume the fund's sales of ABC stock does not further depress its share price.

What are two of the key checks and balances in place to help manage the incremental risks associated with the hedge fund industry?

What are some of the major market events in the last three decades that have raised the issue of systemic risk?

Based on the current regulatory environment, even if a U.S. hedge fund is exempt from registration under the 1940 Act, what type of regulations does it need to adhere to?

Under current U.S. laws, when does a fund (and its advisors) need to register with the SEC?

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