9oo1444o4 Chapter 616 Hedge Funds

… On the first day of the month, the Ministers for Foreign Affairs and Finance of the 12 countries of the European Community signed the Maastricht Treaty. The treaty covers many aspects such as politics, economy, military, justice, and citizen welfare, but the provisions on the European Monetary Union are the core and the most controversial part. The treaty stipulates that the countries of the European Community should complete the work on the harmonization of the currency in three stages. The first stage was to strengthen the "European exchange rate mechanism" that existed at that time to realize the free flow of capital; The second stage is the establishment of the "European Monetary Agency", which is responsible for coordinating the monetary policies of the countries of the European Community; The third stage is the establishment of a unified European currency, the euro. In addition, the "European Monetary Agency" will be upgraded to the "European Central Bank" to formulate a unified monetary policy for EU countries.

If the above plan can be successfully completed. The euro will become a currency comparable to the dollar, the capital markets of the 12 EU countries will be seamlessly integrated, and the cost of capital circulation will be greatly reduced, which will be very beneficial to the development of the European financial industry, and European bankers and fund managers are expected to regain large swathes of territory lost in the past few decades from the Americans and Japanese. However, the Maastricht Treaty cannot change the status quo of uneven economic development in EU countries, so it can only be a congenitally deficient and fateful treaty. Germany, at the peak of its economic boom, dominates the economic exhibition of the whole of Europe. Britain, which is governed by the Conservative Party, is mired in recession; The economic situation in Italy in southern Europe is even worse than that of the United Kingdom.

The British, apparently aware that the unification of the European currency would only exacerbate Germany's economic hegemony and even make the "Euromonetary Agency" synonymous with the German central bank, were so they trembled and were suspicious. At the time of signing the treaty, Britain demanded that the EU countries recognize that it "has a non-participating European currency", which means that when the euro is established at the end of the century, the pound will continue to exist, and the British central bank will continue to set monetary policy.

Zuo Jiang knew that the opportunity had come, and while maintaining close cooperation with Soros, he instructed Jenny to form an elite team to secretly operate this matter, because Zuo Jiang did not have an accurate memory of the incident of blocking Yingpang, but only remembered a general outline, so the secret operation plan he gave Jenny 1 was only a general direction, and the handling of details could only be mastered by the company's elite team according to the ever-changing financial market.

A huge financial investment institution. It is unthinkable not to rely on hedge funds to keep your money safe. At the beginning of Zuo Jiang's establishment of Harry Potter Financial Investment Company. It was by virtue of the Great Depression in the United States that he entered the stock market and obtained a large amount of dollars, and since then, most of his investment plans have been mainly in the stock market and the acquisition of industries. In order to ensure the safety of the company's funds and reduce the risks in investment, Zhenyang, an expert in financial investment, quickly set foot in the hedge fund industry and established a capable and efficient hedge fund management team to ensure the safety of the company's funds.

Chinese people are familiar with the concept of the Ministry of Funds is 1 Mu years in the Southeast Asian financial crisis, the Chinese government decisively took action to block the financial predator Soros short Hong Kong dollar financial war, therefore. Hedge fund this. The concept is grossly misunderstood. People who are not familiar with finance tend to relegate hedge funds to the troublemakers' business. He also believes that hedge fund managers are some daredevils who seek high risks and high returns. They do this by destroying one. The financial order of the country to pursue its own selfish interests. In fact, this is an attempt to sum up the entire hedging community in terms of hedge funds. Hedge... The traditional method of "hedging" is sometimes referred to as "hedging", that is, by trading several related financial assets at the same time, the risk of the entire portfolio is reduced, and of course, the return is also reduced. A simple example would be: buy a stock and sell its call option short; Short selling a fund. Buy all the constituent stocks of the fund at the same time; Buying stocks in one industry and buying stocks in another industry that has a strong negative correlation with that industry, such as buying stocks in the jewelry industry and selling stocks in the air arms industry at the same time, historical data proves that when the jewelry industry is profitable, it is often in peacetime, and the arms industry is unprofitable, and vice versa. x interstitial s ad time

Hedging, as a means of eliminating risk, involves very complex mathematical knowledge, especially when it comes to financial derivatives, including futures, options, swaps and cap agreements, etc., which is a very esoteric science in itself. In every large financial institution, there will be a group of senior researchers who are proficient in mathematics, physics and computer programming to study such problems, find the best way to control risk, and determine the extent to which it is impossible for financial institutions to be completely free from risk, higher risk often means higher returns. Of course, the above is only a very rough situation, and the specific issues must be divided into specific categories.

One might ask: why do financial institutions hedge? If they need to reduce their risk, why not sell the risky assets and replace them with low-risk assets, or "!; "1 into cash 7 sometimes. Fund managers use a range of financial derivative taboos. The portfolio at hand is fully protected, i.e. it reduces its risk exposure to o theoretically, in this case. The future return of the fund is completely certain1, i.e. one will definitely be earned. Risk-free yield. The question is, why doesn't this fund manager simply swap out the entire portfolio for risk-free U.S. Treasuries or low-risk short-term deposits, but instead uses a bunch of sophisticated means to "protect" the portfolio?

The answer is simple: because there are transaction costs in the financial markets1 Buying and selling stocks, bonds, and other financial assets requires a commission and often takes a long time. Suppose a fund manager has a portfolio of $400 million worth of stocks, and he wants to exchange all these high-risk stocks for low-risk U.S. Treasury bonds, then at least the following steps should be completed: first, give the trader an order to sell, and let the trader sell the stocks at the best possible price within a certain period of time1; Second, it is up to the trader to make a trade request to the brokerage, and generally speaking, only comprehensive investment banks such as Merrill Lynch, Salomon Smith Barney, and Morgan Stanley can handle such large transaction requests, and often more than one investment bank is required to complete this difficult task; Third, after receiving a request for sale, the securities broker of the investment bank should immediately look for a buyer in the securities market, that is, the counterparty, which may be one or several large financial institutions, or many small investors1 In short, the transaction must be matched as soon as possible within the specified selling price. Finally, the broker has completed all the matching transactions, and all the stocks that the fund needs to sell have been bought, and then they can report to their clients, fund managers and traders, and the task has been successfully completed.

The above series of processes sound extremely complicated, but the reality is more complicated than said, because the fund must be extremely cautious when buying or selling on a large scale, otherwise it may lead to two bad consequences: first, if you are too impatient and sell too much in a short period of time, it may cause a sharp decline in the market and you will suffer losses, and the same is true for buying. It may cause the market to climb sharply; Second, if you leak the news during the trading process, it is equivalent to leaking your own trading strategy and allowing competitors to take the lead. Just like the deployment of troops by a military commander in a war, if the whole process of mobilizing troops is clearly seen by the other side, what are your chances of winning?

As a result, fund managers in the vast majority of cases choose to hedge to protect their portfolios rather than simply sell them. To build a hedging strategy, you only need to buy and sell a range of FDIs, rather than the asset itself, which avoids most of the transaction costs and has a high degree of flexibility as long as you change the FDI portfolio on hand a bit. You can get a very different hedging strategy. You can choose to hedge all the risk of 1 paste. You can also choose to hedge only 1 or even the risk of the hospital, it all depends on your prediction of the future market and your risk tolerance.

However, if there are strategies to reduce risk, there are also strategies to increase risk, and the two are opposites. For example, if you want to reduce your risk, you can buy stocks in both the jewelry industry and the arms industry. In this way, whether it is war or peace, one of these two departments will always perform well and the other will perform badly, and you can get relatively stable income; But what if you firmly believe that there will be war in the future and decide to gamble with all your might? You can sell short jewelry stocks at the same time as you buy military fire stocks. In this way, once there is a real war in the future, while arms stocks go up, jewelry stocks will fall, and you will make a profit on each long and short positions, and the gains will be amazing.

In the classic battle to block British sales, Soros was convinced that Germany would not save the British economy through his keen mind analysis, and the large-scale short selling of the pound sterling, the last defeat of the British mistake and the success of the British mistake, if the German banks intervened1, he would lose all his money. In the midst of the Southeast Asian economic crisis, Soros misjudged the attitude and determination of the Chinese government, and the Chinese government came to the rescue of the market and mobilized tens of billions of dollars of foreign exchange to support the Hong Kong dollar, so that it would not dare to get involved in the Chinese financial market after losing billions of dollars.

After Zuo Jiang successfully poached Chen Wen's team, he completely handed over the affairs of the computer training school and the campus network to Zhou Chaoming, Wang Haihong and Liu Li to manage, and put his energy completely on the financial market in Europe, and began to lay out for blocking British sales.