A model for small basket equities financing
A haircut model for equity baskets based on credit and equity indexes is introduced
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The collapse of Archegos Capital Management and the losses incurred by its lending banks in early 2021 are timely reminders of how challenging it is for banks to price and risk manage hedge fund financing transactions. Wujiang Lou develops an equity portfolio haircut and pricing model that gives credit analysts and traders a tool to balance risk and competitive pricing
Small basket equities financing is the bread and butter of hedge fund financing businesses
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