Thursday, October 6, 2011

Investment Banking and International Business | Business Journal

finmodelinglarge Investment Banking and International Business

Investment banking and global finance is much like a great game of craps. Maybe with a fundamental change is. Just assume that any payment in craps is increased by 1/36th. What this means is that the benefit goes to the player. The players are the bankers and hedge funds with capital to deploy. The advantage that I suggest can be expressed as an increase in payouts for various bets. I chose the unit of measure: 6 x 6, because all bets in craps to be paid in several multiples of six.

Calling it a growth rate. 1 / 36 is just over 2%, and is the basic unit of data ahead of the game. There is a prize in our world to do things, so it?s not a zero sum game ? and certainly not often in favor of the house. Who?s House? Well, in this example, the waste and failed investments. Non-producing assets as you want. Think of it this way: There is a huge amount of capital to be deployed at any time. It can be kept on the sidelines, but someone is quietly stealing your chips when you leave it on the shelf. We need the table. Most are conservative, or at least covered in some way. A small amount can occur on rough roads, fields, horn, craps, etc. Many ways to lose money. Most of us do not do it every day, but the guys do financially.

It?s probably enough just to say they know what they do when betting on the pass line (investment, much in stocks), not only a (short), hi-low (IPO), local (securities, CDOs / MBS, actions preferred) and check-nonsense (credit default swap).

The idea is risk management. Large amounts are spread on the table once the papers are released. Notice how the evening news every night of the economy, is on a rebound or dive into the depths of hell? There is some volatility inherent in the economy, certainly exacerbated by the efficiency of automated information systems. Even if we do not have the wonders of automated trading has not changed the fact that our entire system is built around our expectations of the future. The expectation of new supply that information. Volatility is a bigger bet down at the same time. I know it?s not much sense, but is supported by mathematics.

Bankers have a period slightly longer than most people on some things. So we have 30 year bonds. We are cash flow on a pro forma basis for many years in the future. Our model of discounted cash flow sacred has all the answers, the sum (converted to the present value of course) is equal to the expected value of our current, basically anything. Bankers bet leaving their seats and never tear down their roads. Bankers recognize the deficit of 5% in the field, but the time their efforts to determine whether four non-field bets came in a row.

My equation works even better when you realize that at different points in the past, the payments are even better. There were several times in the last 15 years that disbursements in several stakes are even better. The dot.com era was heavily favored in the horn and more difficult. 100:1 Perhaps issues such as Apple, Amazon and Google at different times.

The current economy has not only the advantage 1 / 36 core removed, in fact, an additional 1 / 36, maybe more. Money can still be done in the game ? and the Fed (the label home) will loan the best secured as much as they need. Is that your game every day (several times a day for many market participants) is now seen as a slight disadvantage. There are still made plays, but the credit managers are playing conservative. Not a lot of horn or roads in this difficult time. The point is ten, and that are loaded on the pass line with full odds. Just hunkered down and hoping we do not crap out.

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Source: http://www.wemakemoves.com/investment-banking-international-business

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