The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.


All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.

Weinstein’s Household management

       

View graph.

Household's spreads had widened to 800 basis points over Libor in the five-year bond and 1,000bp in the three-year in October, while its share price rose $6 to $26.


Boaz Weinstein, head of credit derivatives trading for the Americas at Deutsche Bank, decided to make the most of this by going long credit, which he did by buying $10 million-worth of five-year bonds at 75 cents on the dollar. He estimated that the recovery rate for Household's debt would be 45 cents and so had 30 points of downside to protect. Against this default risk, Weinstein sold short $2.5 million-worth of equity - 96,000 shares - at $26, resulting in a partial hedge.


The trades took place on October 23 and 24. A week later, Household's spread tightened from 800bp to 600bp and its equity price fell from $26 to $23.



You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree