Chapter 238
Putting the hot mobile phone on the corner of the table, Newman rubbed his uncomfortable ears, stared at the cold vegetable soup in front of him, and tightly squeezed his mouth.

Ten years ago, the moment he was scapegoated by Salomon Brothers, what Newman had always believed in collapsed.

The reputation in the industry that he has painstakingly built over the years allowed him to quickly obtain the Office of Bear Stearns, and he did not need to go up to the rooftop to choose to jump off, but the initial period was very hard, even more difficult than when he first entered the industry. It's hard work, but fortunately, he was promoted to the head of the venture capital department in a few years and really entered the management, so that in recent years, the most profitable long-term capital management company on Wall Street has thrown an olive branch...

Before coming here, the prophet of Omaha would not express his opinion on this, but the young man who was brought into the game by Hervey made Newman look a little different. When they met for the first time, naturally they would not have too deep acquaintance, but Unexpectedly, when he was about to set off and return, he actually received a call from the other party. The question he consulted was so absurd and almost ridiculous that he felt that the high evaluation he had given the other party at the poker table before seemed a little inappropriate... …

Jingle Bell……

Newman picked up the phone, and the questions he had consulted before had been answered. The risks and benefits were in line with his guess. Although the procedures were a bit troublesome, since there are fools who are willing to give away money for free, there is naturally no reason to refuse them. In terms of security, Newman repeated the previous question again. "A profit of 100 million or a loss of 5000 million, are you sure such a high leverage can pass the audit?"

"Well, don't say it's fifty times, even if it's a hundred times, the audit department will pass it. The target is Long-Term Capital Management. If the benchmark profit is lower than double digits, the audit department may hesitate a little bit. Seconds, betting that Long-Term Capital Management will go bankrupt within [-] months, such fools are quite rare, this kind of money is not earned for nothing, is there anything easier to earn than this?"

The hearty laughter on the other end of the phone made the corners of Newman's lips twitch unconsciously.

Forget it, it doesn’t matter why the young man was favored by the Oracle of Omaha. Since he is not afraid, he has nothing to worry about. Maybe he still thinks that the annual salary increase is not fast enough, and the equity incentive is not high enough. , Is the year-end bonus not enough?

After successfully completing the psychological construction, Newman heard the boarding announcement announcement and called Yusheng. The CDS contract worth 100 million needs a risk assessment. For sexual payments, Bear Stearns can also give two-point payment discounts in accordance with industry regulations.However, there is no discount for paying in installments, and once the funds are not remitted to the designated account on time, the contract will be voided immediately...

It went so smoothly, it really exceeded expectations. Yu Sheng hung up the phone and saw Jessica sitting curled up in the corner of the sofa with a surprised expression, so he smiled and asked her what she was thinking?

"You plan to use 100 million to gain 5000 million profits?"

Yu Sheng nodded. "Yeah, the key is to be able to pay in ten monthly installments. You only need [-] yuan per month. If the current funds are not very tight, perhaps adding a little more is the most correct..."

"But the problem is that you also admitted before that the long-term capital management company established only three years ago has an astonishing profit margin, so how did you judge that this company will go bankrupt within eighteen months?"

"Profit is directly proportional to risk, take a small gamble, take a gamble..."

"I still don't understand what the hell is going on here. Neuman is an executive at Bear Stearns and the CDS contract you want to buy is for Long Term Capital Management, two completely unrelated businesses , Why is Bear Stearns willing to make a special contract to sell it to you? The profit is only 100 million, and the loss is 5000 million. Why would you be willing to let you bet on this with a big deal?"

"What CDS is has been explained to you just now," Yu Sheng picked up the pen on the coffee table, and circled what he had written on the sticky note before. "Bear Stearns is an investment bank, and it is certainly not willing to take such risks, so there is a high probability that after selling me this contract, it will buy a credit default swap contract to avoid risks..."

Jessica leaned over and pointed to the circled content on the sticky note. "Wouldn't it be possible for Bear Stearns to make no money by selling you one contract and buying another similar contract?"

"How could it be? The contract sold to me is worth 100 million, but Bear Stearns can buy a risk-averse contract at a very low price, so the final result is that if Long-Term Capital Management does not go bankrupt, then Bell Stearns The contract purchased by Stern is void, but the difference between the two contracts becomes Bear Stearns' net profit..."

"That is to say, if the contract you purchased is established, Bear Stearns seems to need to pay you fifty times, but because the risk is transferred to a third party in advance, the final result is that Bear Stearns has no compensation at all. risk, and still earn the difference between the two contracts?”

"Yes, that's why this contract was finalized so quickly."

Jessica suddenly realized, covered her mouth and murmured. "I understand that the contracts that Bear Stearns uses to hedge risks will eventually be shared by other financial institutions or insurance companies. In this way, the risks will be decomposed and gradually reduced, and the profits will tend to normal levels. As a result, similar contracts seem to be very risky, but in fact, as the number and amount of contracts increase, the risk will gradually decrease? It is equivalent to aviation insurance. No insurance company is willing to fully bear the risk, so many Let the insurance companies share it together, although the profits are handed over, the risks can also be borne..."

Yu Sheng gave a thumbs up. "sharp!"

"No wonder my grandpa always said that Wall Street is doomed sooner or later. Similar risk hedging looks like all participants have obtained risk-free profits, but the risk itself still exists. The safety of all parties depends on a major premise , that is, all participants can live well. But once one of them fails to pay, the transaction chain will be broken, and the entire balance will be destroyed, and the final result is like dominoes being pushed down, wow Suddenly all participants will be finished..."

(End of this chapter)

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