CAT | Investment Banking
Arbitrage is the process of taking advantage of the mis-pricing securities or a price difference between two or more markets. Suppose that the exchange rates between the Euro, US Dollar and Singapore Dollar are as follows:
EUR -USD – 1.4808(buy), 1.5008(sell)
EUR-SGD – 2.0975(buy), 2.1175(sell)
USD-SGD – 1.4472(buy), 1.4672(sell)
This essentially means that the Foreign Exchange firm (say Thomas [...]
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The Basics of Investment Banking: Corporate Credit Products and Interest Rates
0 Comments | Posted by Ash in Investment Banking
Before we go on to explore Interest rate swaps, let us get a rough idea of the playing field. Think for a moment that Intel is setting up a bunch of fabrication plants and research labs in China and needs a 1 billion US$ loanfor that purpose. Let us say that it approaches Citibank and [...]
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The Basics of Investment Banking : Interest Rate Swaps
0 Comments | Posted by Ash in Investment Banking
Moving on to a different example, suppose that Halliburton owes $ 1 billion to a syndicate of banks led by ABN Amro and that the principal amount is repayable after 5 years.Now, assume that the interest is payable annually and the rate is pegged at the 12 month LIBOR + 100 bases points. Suppose the [...]
