My Age of Investment

  Chapter 942 Total Income Swap

  Xia Jingxing smiled and looked at the talking Mai Jinheng, "I need financing."

  As if already guessing Xia Jingxing’s thoughts, Mai Jinheng asked calmly, "How much do I need?"

  Xia Jingxing didn't speak, compared with five fingers.

   "Five times leverage, that's okay."

  Just finished speaking, Mai Jinheng suddenly reacted, not right! They Morgan Stanley has given Envision Capital this leverage multiple.

   "It can't be fifty times, right? Don't you want to trade foreign exchange, Darren?" As he talked, Mak himself laughed. Fifty times foreign exchange is too little.

  Belankfan looked at Xia Jingxing suspiciously while thinking quickly in his heart.

   Suddenly, Berenkovan seemed to have thought of something, his face changed drastically, and he asked in an uncertain tone: "50 billion US dollars?"

   "Yes, a $50 billion stock position!"

  Xia Jingxing looked at the two with a smile, "How? Is this lively connection? Stock transaction fees and financing interest returns will be very impressive figures."

  Mai Jinheng shook his head repeatedly, his face solemnly said: "Too high, 5 billion U.S. dollars leveraging ten times the leverage, too much risk!"

   "Yes, Darren, counting the warning line, you don't need to really reach 10% stock price fluctuations, just a few points of fluctuations, and your 5 billion US dollars will directly evaporate from the market."

  Berlankfan said in a very serious tone, “I know you want to short the stock market, even if the subprime mortgage storm continues to expand as you have announced, but 10% stock price fluctuations are still easy to appear.

  If you add that someone is playing against you, the risk of liquidation is even greater. "

Xia Jingxing smiled and waved his hand: "Misunderstood, I don't dare to use ten times leverage! Didn't I say? The new fund of 5 billion US dollars, plus the income that is about to be realized, China Investment Corporation also invested in us. For a fund of only 1.5 billion U.S. dollars, the margin can reach at least 10 billion U.S. dollars."

   Hearing this, Mai Jinheng looked slightly softened, "In other words, it is still five times leverage?"

  He thought for a while, and then smiled bitterly: "The risk is still not small. Once there is a big market fluctuation, there will be a lot of liquidation in a stock position of tens of billions of dollars, and there will be a high probability that the position will be liquidated."

   "It's not a high probability, it's 100%!" Belank Sanskrit said with certainty.

  Xia Jingxing spread out, "isn’t this the same as the previous leverage?"

  Ma Jinheng gave Xia Jingxing a glance, “Dalun, we don’t know people to talk secretly. The amount of capital in Vision was small before, and even if the position is closed, it will not cause big fluctuations in the market.

  It is now tens of billions of dollars, and quantitative changes have caused qualitative changes. "

  Belankfan nodded in agreement: "Yes, Darren, it's not that we are unwilling to help, such a big thing, once there is an omission, we can't afford it."

  President Xia Jing sighed, "Oh, what about using the financial investment tool "total income swap"?"

Total Return Swap, TRS contract for short, means that the buyer of credit guarantee transfers the total income of the reference asset to the seller of credit guarantee during the period of the agreement. The total income can include principal, interest, prepaid expenses and favorable asset prices. Capital gains from changes and so on.

  Berlankfan narrowed his eyes, "You mean let Goldman Sachs and Morgan Stanley help you sell short?"

   "Yes, the account is controlled by you. As long as the investment is over, the income will be settled, so the leverage can be looser, right?"

  Xia Jingxing probably also knows that because his own party’s funds are too large, the leverage will be limited by the investment bank very low, because this is a game of risk between the two parties, and the leverage is too high, and the investment bank is easy to be dragged down by customers and cause losses.

  The total return swap is relatively easy to accept.

  This is also a kind of credit derivative, which is the same as the CDS credit default swap/swap.

  The two parties to the CDS transaction agreed whether there was any breach of contract. The total income swap agreement is similar to "holding stocks on behalf of others." Investment banks are entrusted to help make long or short positions. Profits and losses belong to the customer, and the investment bank earns transaction fees and financing interest.

  At the same time, this operation has another advantage. It avoids the information disclosure of hedge funds and does not need to reflect the investment on the balance sheet to achieve the effect of concealing itself.

  But investment banks need to face the dual risks of credit risk and market risk.

In his 2002 shareholder letter, Buffett warned against the risk of "total return swaps": total return swaps made margin requirements like a joke, when Charlie and I read the derivative activities described in the footnotes of major banks’ financial reports , The only thing we can understand is that we don’t understand how much risk lies in these activities...

  The description of the old man is too exaggerated, and the deposit is still to be paid, otherwise the investment bank is also worried about being baited.

  Considering the impressive record of Envision Capital in the past and the scale of its asset management, Berankefan has actually made a move, but the deposit is a prerequisite, so he asked: "Dalun, how much deposit are you willing to pay?"

   "20%."

  Xia Jingxing is actually a little afraid that the leverage is too high and the game will be broken, so he conservatively wants a five times leverage, and he will also reserve a certain amount of funds in his hand. When a stock rebounds, he can add a margin at any time to ensure nothing is wrong.

  Belankfan did not speak, but looked at Mai Jinheng, who looked thoughtful.

  In order to make a small amount of money and spend tens of billions to accompany customers to play, investment banking business is so difficult.

   But then again, since there are such mature products in the market, risks and solutions are fully considered.

  Wall Street investment banks are all veteran players in the capital market. They have always been the only ones who pit hedge funds, and it is rare for hedge funds to pit them.

   really appeared, it is also a small probability event, the big deal is to use the profit to offset it.

  This is the same thing as selling insurance, allowing a certain percentage of the risk rate.

   "Okay, Morgan Stanley will take this job."

  Considering this year’s ugly financial report, McGin-Heng thinks that the business of Envision Capital can still be tried, and the risk is not particularly high.

  Xia Jingxing smiled and nodded towards Mai Jinheng, then looked at Bellan Kefan, who smiled and said, "No problem, we will take it too."

  Finally convinced the two white gloves, Xia Jingxing was in a good mood, and the corners of her mouth rose slightly.

He quickly remembered something and said: "We still have a small request. We want to hire Goldman Sachs and Morgan Stanley to design highly leveraged bearish derivatives and sell them to major investment institutions to match them with our counterparty trading. "

  Belankfan was taken aback, then laughed loudly: "No problem, this is a value-added service."

  It’s not like doing this kind of dirty work once or twice. Berankvan is familiar with it.

  In fact, Goldman Sachs helped Envision Capital design a synthetic CDO last year, and the sales volume was very good. A large number of investment institutions bought this product, and it became a rival to Envision Capital.

  With the occurrence of the subprime mortgage storm some time ago, these investors have lost their pants, while Envision Capital has made a lot of money.

  If you want to do some flower work, you can't do without the help of Wall Street investment banks.

  As long as you give money, any rival investment bank can fool you.

  Of course, the transaction is absolutely fair, and winning or losing depends on the differences in perceptions of subprime mortgages between institutions.

  Mai Jinheng took a deep look at Xia Jingxing. At a young age, his heart was as dark as them!

  By the way, only such a person can play Wall Street! Otherwise, only Wall Street will play.

   "Okay, this is very simple, don't worry, leave it to us."

  Mak Jinheng agreed with a smile on his face, and matched the rivalry. As an investment bank, they can earn an extra commission. Why not?

  The intermediary is like this, eating two ends, and sometimes even taking one end of money to help pit the other end.

  Xia Jingxing and Bellan Kefan and Mai Jinheng discussed secretly in the room for more than two hours, and happily reached a series of heavy cooperation.

  When the three of them walked out the door, everyone outside was already gone.

  Xia Jingxing called to Ivanka and was about to leave, but Paulson called out.

   "Daren, wait for me."

  (End of this chapter)