"You've revealed to them the agreement between us?"

After a few people left dejectedly, Ivana walked in with a strained face, and the first sentence was directly to Zhong Shi, "Do you know the consequences of doing this?" These agencies were originally on our punishment list, but now not only can't punish them, but also let the whole news leak out! ”

Although she didn't participate in the whole meeting, Ivana could guess from the faces of several people when they left that Bell Stone had told them about the current situation.

Although I don't know why Zhong Shi did this, Ivana is undoubtedly very annoyed by Zhong Shi's behavior. If she hadn't known that the person in front of her should not be overly persecuted, otherwise she would have added punches and kicks to him.

"Don't worry, it won't leak out!"

Zhong Shi waved his hand disapprovingly and said, "If I don't even know this thing, then I definitely won't say it." Don't worry, I'm in control of the whole thing! ”

"Huh, are you measured? What do you do? ”

Ivana was still unrelenting, and continued to ask, "Originally, we planned to be the second to attack the Bridgewater Fund after you. But now that you are making such a fuss, the whole world will know about our actions, and what will we do in the future? ”

"Hehe, you don't understand people's hearts!"

Zhong Shi felt a headache about this woman's step-by-step approach, and wanted to throw his hands away, but after thinking about her background, he had to endure it again, and patiently explained, "If they leak this news and cause competitors to take precautions, then their performance will not be so prominent!" ”

"Only if they do well will they be able to raise more money! This is the kind of market where money always flows to better-performing institutions. Even if it's to get more management fees. There's no way they're going to leak it to anyone else. ”

"How can this be?"

Ivana was stunned for a moment, and opened her mouth wide for a while before she said blankly, "I...... I didn't expect your world to be like this. ”

She seems to have the meaning of being soft.

"So if you don't understand, don't talk nonsense!"

Seeing that she was no longer tossing, Zhong Shi suddenly let out a long sigh. "There's another reason, if any of them break in by mistake and form an adversary with us in the course of our operation, what will we do? ”

"Although their assets are nothing compared to me. But once we join forces with JP Morgan, it will at least cause us some trouble. If that's the case, the whole plan falls through. Is this responsibility to you or to me? ”

"Me?"

Ivana was silent for a long time before finally saying quietly, "It's better that what you say is right, otherwise...... Hum...... By the way, what are we going to do with JP Morgan? ”

She cleverly changed the subject, and in the conversation just now, she was defeated by Zhong Shi's refutation, and had to find some other face.

"You don't understand!"

Acts that are almost scoundrels towards the other party. Zhong Shi shook his head helplessly, and then pressed the call button on the desktop. "Come in, it's time to discuss what to do!"

Soon, two oriental men in suits and leather shoes walked into the conference room under the leadership of Jiang Shan.

"These are the two traders who found the problem!"

When he saw Ivana, Jiang Shan involuntarily shrunk his neck, but soon he returned to normal, pointed to the two traders and introduced Zhong Shi, "The one who is a little taller is Liu Mingren." The other is Ou Zhenchu. ”

Liu Mingren is in his thirties, about 1.8 meters tall, white and clean, wearing a pair of rimless glasses, and his body is filled with a strong bookish atmosphere.

Ou Zhenchu is only about 1.75 meters. With dark skin and a strong body, he looks like the kind of person who exercises regularly. He has a flat head and big, bright eyes that give him a sense of energy.

"Zhong Sheng!"

After the two came in, they nodded to Zhong Shi in unison, their expressions solemn and reverent.

As traders at X-Spatial Fund, most of them work in sub-funds, and they don't have a lot of time to deal with their legendary boss. In addition, Zhong Shi has been traveling all over the world in the past few years, so when they saw Zhong Shi, they still maintained that sense of awe that outsiders looked up to.

"Okay, it's all your own people!"

Zhong Shi was accustomed to this kind of treatment, and after waving his hand at the two, he immediately said, "Don't come to the outsider's set." Tell us what you discovered, what the logic is, and how you decided that JP Morgan was behind the phenomenon. ”

"Okay!"

The two of them hesitated for a moment, and soon got to work, one of them began to tinker with the dropper, while the other took out a document from his briefcase and handed it to Zhong Shi.

"Here's the thing, I believe everyone knows the CDX index and IG contracts!"

After a while, a series of charts and figures were projected on the screen on the wall, and Liu Mingren, who was in charge of the explanation, cleared his throat and began to say, "It is generally believed that the IG9 contract is the most liquid among the CDX contracts that have been issued in the market, because it was the last index issued in September 2007, and many structured products are priced with IG9." ”

"However, after calculating the fair value of the IG9 contract, we found that the average price of the company's CDS in the IG9 contract and the index are very different, in other words, there is room for arbitrage between the two."

"Wait, what is the difference between the price of the IG9 contract and the average price of the company's CDS in the index?"

Liu Mingren didn't say a few words before he was interrupted by Ivana, and the endless jargon that came out of the other party's mouth made Ivana dizzy, and seeing that Zhong Shi and Jiang Shan didn't say anything, she had to ask hard, "And what does arbitrage mean?" ”

“……”

Liu Mingren was very surprised, originally he thought that the other party had appeared here. She must have been a professional as well, but it was clear from her questioning that this beautiful woman didn't understand anything.

He was a little overwhelmed at this time, and his panicked eyes quickly turned to Zhong Shi and Jiang Shan, but the two seemed to be indifferent and didn't say anything at all. At the moment he had to bite the bullet. Patiently explained to Ivana, "The fair value of the CDX index contract is the average of the prices of a single CDS of all companies in the index. That's how the CDX index was calculated when it was first set. However, it can be seen from the model calculations that the average price of CDS for a single company deviates greatly from the price of the CDX index, and this is the problem. ”

"As for the so-called arbitrage, it means that when this happens, the market will buy cheap CDS. When selling a more expensive CDX index to take advantage of the difference, this is called arbitrage, and eventually the average value of CDS and the price of CDX tend to be the same until there is no possibility of arbitrage. It should be noted that arbitrage is prevalent in every market, but on the IG9 contract on the CDX market, arbitrage activity did not erase the difference between the two. The deviation between the two parties has always existed, and it is much greater than that of other contracts. ”

"What's even more surprising is that. On IG9 contracts, the open interest did not decrease over time, but increased dramatically, and this increase shocked the entire market. Because it has grown by more than 50%, from a total value of $90 billion to a total of $150 billion, a figure that exceeds any other IG contract. ”

"I seem to understand a little!"

Ivana tilted her head and thought for a while. Suddenly he interjected, "You mean someone is manipulating the market so that the prices of the two are not consistent, is that right?" But what I don't understand is why they are manipulating the market. Is there any other scheme? ”

"You're right!"

This time, Liu Mingren was quite satisfied with Ivana's reaction, and couldn't help but boast, "That's true, we think that someone is manipulating the difference between the two in the market in order to profit in the other market." ”

"Let's take a look at this picture!"

As he spoke, Liu Mingren shifted the picture to another chart, "Because of the debt crisis, the market generally believes that the situation will deteriorate in the near term and improve in the long term, which will lead to a very interesting phenomenon." That is, the price of CDS will rise in the near term, and in the long term, the price will fall. ”

"So the market invented a way to play, that is, to use long and short contracts for hedging to earn this part of the difference. Because the price of buying and selling is about the same, what they pay is not much different from what they earn. In the long run, the price of CDS in the last five years will gradually fall, and the price of CDS in the forward 10 years will gradually rise, and from this moment on, the spread between the two sides will gradually narrow, and in theory, this spread will be almost risk-free arbitrage, because even if there is risk, it will be hedged by buying and selling. ”

"But selling the near-term high-priced contracts, buying the long-term low-priced contracts, and waiting until the future when these two yield curves gradually parallel, and then earning the difference between the two, this kind of trading is a sure bet, as mentioned above, all the risk and even the cost are hedged, which is why the notional value of the IG9 contract has skyrocketed."

"It is conceivable that there is a giant in the market that is constantly engaged in such risk-free arbitrage trades that the notional value of IG9 contracts is constantly expanding. Originally, it was impossible for us to know about this kind of position, because it was an over-the-counter market, and it was impossible to disclose position information. However, according to the arbitrage activity in another market, we find that the arbitrage activity in this market completely does not erase the undue price difference, and we know the size of the position in this market. According to my estimates, it would take at least hundreds of billions of dollars to completely ineffective arbitrage in another market. ”

In the end, Liu Mingren shrugged his shoulders and said with an exaggerated expression, "This is completely the impact of one market on another market, and it is a fluctuating arbitrage that is difficult to notice on weekdays." If this incident is compared to a case, it is equivalent to a person killing someone, and the blood splashed accidentally falls on another person's body, and we finally discover the truth of the whole thing after tracking this blood. ”

He compares himself to a cop and is clearly quite pleased with the results of his tracking of market clues.

"But how are you sure it's JP Morgan behind the scenes?"

After listening to so much, Ivana barely understood, but there was one last question, "Could it be another agency?" For example, Bank of America, for example, Citibank, or could it be some other messy institution? ”

"Good question!"

Ou Zhenchu nodded, took over the topic, and said, "Leaving aside the arbitrage moves, let's just say that the original purpose of this strategy is definitely to protect bond positions." There's no doubt that it's cheaper and protects more exposure than CDS. ”

"Looking at the whole market, there are many companies that need to protect their bond exposures, but the need to protect such a large amount of bond exposure can basically be counted on one hand. Add to that the fact that they are one of the largest bond issuers in their own right, so it's reasonable to assume that only JP Morgan would do that. (To be continued.) )

PS: Thank you book friends for the feet by the river, cyclones, and I am a little dust for voting for the monthly ticket! It's not easy to figure out these theories and then express them, but fortunately, it didn't take too long, I hope more book friends can pay attention to and support this book, thank you~