another consideration: maybe guys found guilty of insider trading, market manipulation, and wire fraud shouldn't be allowed to continue trading with billions of dollars
That’s exactly what happened (SEC barred him from trading) and he found the loophole through trading in the private equity business he made. Slimy indeed
Thank you so much for the explanation on TRS! I work at a firm where we work with CDOs and some TRS deals. For the last two years I always wondered what exactly a TRS was.
Seems to me if they collude with each other to crush a company on margin they can do so. And there seems to be very little regulation about it. These margins are allowing instability in the market and should be curtailed by regulators.
This is the correct comment. Even if over leveraged - if the brokers had hedged the positions, which is kinda their only job, then it wouldn’t matter nearly as much. Due to having no hedge, they’re just as trapped as Hwang was. It really doesn’t matter much that he had too much exposure - smaller exposure could have resulted similarly.
I blame the investment banks. They are basically giving credit to a man convicted of fraud. The whole point of a TRS is to create leverage. They got greedy.
Good work Kieran - the only thing is, as I understand it - all of the 4 mates drunk at the same wine bar and each knew that the other had lent Bill $1000. Horse and stable door in my book. Question: is this big enough to create another Lehman Brothers event somewhere down the line?
Thank you Graham! You raise a good point. This one event no. However what slightly concerns me is how many more of these under-the-radar funds are similarly exposed like Archegos was. I'm hoping this is a one-off but there could be thousands, each over-leveraged on one or two stocks. I think these large investment bankers need to remain vigilant on who they lend to and how much margin they let people play with.
@@KINGCADEMY ah okay, thank you. It looked like some sort of sketchpad application with the way you have the colors on the left and the chalkboard in the background. Nicely done, and also good explanation of swaps.
@@viksra Ah yes I used to do these videos and draw and record in real time so i used a colour palette to save time switching between colours. Thanks man I appreciate it.
Love your videos! But one question: does he have to use total return swaps to get the leverage? Plenty of options can give him leverage. Seems to me that he uses TRS primarily to get away from public scrutiny.
Well if you figured out what custodian bank was providing him with the best return rate, then he could utilize the other custodian banks as a pyramid biding up his initial position. Definitely not a good idea!
the question is if he sold prior to the "dip", would he be considered an insightful and successful investor instead? we need to be mindful of who we consider our role models. Most of them sold before the "dip" or perhaps haven't yet encountered the "dip"
I didn't understand why the investment bank acts as intermediary instead of archegos investing directly. Could some one clarify? I wanna know the risk and reward involved for the IB's to be specific.
Its all to do with margin and buying power. Investment banks allow investors to trade on margin - meaning that they can trade with a lot more than they would otherwise be able to put up. IBs do this as they could potentially earn a lot more from the trades. However the downside as I spoke about is that they need to be able to rely on investors to keep up with their margin calls if positions go the wrong way.
Chose the video cause it was the shortest, taking the final exam tmrw on Financial risk management, and it was the best explanation within the time given, saved a lot of time, thanks a lot!
Tnx for simplifying the $20Bn blowup in under 5minutes. Good job!
Glad you found it helpful Pradeep!
Agreed, thanks so much
Did they definitely buy the underlying the other side? My understanding is in a TRS the side paying return of the asset doesn’t have to own it
Great video! Simple breakdown of what a trs is!
Many thanks Luca!
another consideration: maybe guys found guilty of insider trading, market manipulation, and wire fraud shouldn't be allowed to continue trading with billions of dollars
That’s exactly what happened (SEC barred him from trading) and he found the loophole through trading in the private equity business he made. Slimy indeed
@@rubadubmedia the investment banks didn't have to do it. This is on them. They shouldn't exist.
GME - best company in the world.
Can’t stop won’t stop.
Thank you so much for the explanation on TRS! I work at a firm where we work with CDOs and some TRS deals. For the last two years I always wondered what exactly a TRS was.
Thank you Claro, glad it helped!
Ur channel needs to blow up seriously, nobody can explain like u , tnx !!!!
awesome explanation. please continue making such videos.
You are very welccome DotaLove. Many more to come!
Seems to me if they collude with each other to crush a company on margin they can do so. And there seems to be very little regulation about it. These margins are allowing instability in the market and should be curtailed by regulators.
i think it's not 100% bill hwang fault . those investment banks are also causing their own loss .
This is the correct comment.
Even if over leveraged - if the brokers had hedged the positions, which is kinda their only job, then it wouldn’t matter nearly as much.
Due to having no hedge, they’re just as trapped as Hwang was. It really doesn’t matter much that he had too much exposure - smaller exposure could have resulted similarly.
Great video. Very easy to understand. Thanks.
Cheers David!
I blame the investment banks. They are basically giving credit to a man convicted of fraud. The whole point of a TRS is to create leverage. They got greedy.
TRS I remember these when I was at BofA, what a shitty product. Should be banned.
The best after so much surfing
Glad you liked it Nitish!
Something tells me this guy went short on all those positions he knew would get dumped on those total return swaps and made $$$. This guy is a genius.
You know what... there is definitely something to be said for that.
Be difficult to spend the money while in prison.
Never a good idea to lose rich ppls money, especially if their Swiss.
Great video! Thanks !!! Waiting for new videos rn
Thank you Nelly! More to come.
Good work Kieran - the only thing is, as I understand it - all of the 4 mates drunk at the same wine bar and each knew that the other had lent Bill $1000. Horse and stable door in my book. Question: is this big enough to create another Lehman Brothers event somewhere down the line?
Thank you Graham! You raise a good point. This one event no. However what slightly concerns me is how many more of these under-the-radar funds are similarly exposed like Archegos was. I'm hoping this is a one-off but there could be thousands, each over-leveraged on one or two stocks. I think these large investment bankers need to remain vigilant on who they lend to and how much margin they let people play with.
very well explained, can i have this video in English pls😂
Indeed. Amazing explanation. Subscribed!
wow!
This is a perfect case for taxpayers to bailout
Plz make a video about liquidation preference and reverse vesting in startups
Supperr underrated...
Thankkss mate!
Too kind! Thanks Ankit.
What program are you using to draw on?
Hi Viksra, I use Photoshop for the drawings, then Quicktime and Adobe After Effects for the recording and editing.
@@KINGCADEMY ah okay, thank you. It looked like some sort of sketchpad application with the way you have the colors on the left and the chalkboard in the background. Nicely done, and also good explanation of swaps.
@@viksra Ah yes I used to do these videos and draw and record in real time so i used a colour palette to save time switching between colours. Thanks man I appreciate it.
Love your videos! But one question: does he have to use total return swaps to get the leverage? Plenty of options can give him leverage. Seems to me that he uses TRS primarily to get away from public scrutiny.
Kath, thanks! Glad you enjoy the videos. That is a good question and I think you are probably right!
So TRS’s are just leverage?
Well if you figured out what custodian bank was providing him with the best return rate, then he could utilize the other custodian banks as a pyramid biding up his initial position. Definitely not a good idea!
the question is if he sold prior to the "dip", would he be considered an insightful and successful investor instead? we need to be mindful of who we consider our role models. Most of them sold before the "dip" or perhaps haven't yet encountered the "dip"
so 2001 was 2000 and hwang
Great video, perfect explanation in less than 5 mins.
Glad it was helpful Claudius!
That explanation was brilliant, you’ve got my subscription
Super informative video - thank you for simplifying this!
best explanation of this incident
Thank you Manish!
I didn't understand why the investment bank acts as intermediary instead of archegos investing directly. Could some one clarify? I wanna know the risk and reward involved for the IB's to be specific.
Its all to do with margin and buying power. Investment banks allow investors to trade on margin - meaning that they can trade with a lot more than they would otherwise be able to put up. IBs do this as they could potentially earn a lot more from the trades. However the downside as I spoke about is that they need to be able to rely on investors to keep up with their margin calls if positions go the wrong way.
Very well explained thx for sharing !
Thank you Boni!
Your welcome keep up the good work mate ..
There is no way to exactly who made and lost money?
Feeling Blessed and Expressing Gratitude my God 🙏 I love you so much
Thank you Ravinder!
Really helpful summary. Thank you. 🙏
finally a proper video
Thank you Mohamad!
so poor bill didn´t even make any money
Dang, very well explained and put together! That guy is a genius 👏!
Thank you! Glad you liked it.
Very good review
Thank you Edward! Glad you liked it.
fascinating! well made
I used this explaination in one of the interviews. Thanks a lot.
Really glad it helped Saurabh. My pleasure.
Thank you, pretty clear and succinct!
No problem. Glad you liked it.
What would be the probable interest rate??
in terms of?
@@KINGCADEMY annually which banks charge or the fees
Chose the video cause it was the shortest, taking the final exam tmrw on Financial risk management, and it was the best explanation within the time given, saved a lot of time, thanks a lot!
Thanks Gavharoy! Really glad it helped and you found it useful.
Very well explained, thanks mate!
Thank you! Glad you liked it.