banks operate with leverage...they borrow money at low rates, and use that money to buy / short other assets (stocks, bonds, FX, etc...)
The interest rate at which the banks borrow is not set in stone, and depends on the underlying assets...there is a competitive market to borrow money secured by assets of varying credit quality (what interest rate would you charge to lend $100 million where the use of proceeds was to buy the bond of a company in bankruptcy and that bond was the posted collateral with no other recourse?)....and this happens all day, every day....so this is an exercise in taking bets on various credits...where some loans do in fact default. This can be a profit (or loss) generating activity...so can be "front office"....but not typical front office and depends on the bank and how much risk they take.
Thank you. It sounds like "repo market" activities. On average, would you expect these guys to be inside S&T (i.e. next to guys pricing and selling derivatives), or somewhere tucked away in the basement?
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banks operate with leverage...they borrow money at low rates, and use that money to buy / short other assets (stocks, bonds, FX, etc...)
The interest rate at which the banks borrow is not set in stone, and depends on the underlying assets...there is a competitive market to borrow money secured by assets of varying credit quality (what interest rate would you charge to lend $100 million where the use of proceeds was to buy the bond of a company in bankruptcy and that bond was the posted collateral with no other recourse?)....and this happens all day, every day....so this is an exercise in taking bets on various credits...where some loans do in fact default. This can be a profit (or loss) generating activity...so can be "front office"....but not typical front office and depends on the bank and how much risk they take.
Thank you. It sounds like "repo market" activities. On average, would you expect these guys to be inside S&T (i.e. next to guys pricing and selling derivatives), or somewhere tucked away in the basement?
Velit exercitationem sunt fugit aut et id. Eos suscipit autem fugiat libero aperiam quis dolores. Et modi voluptatibus nostrum incidunt. Commodi labore ea nobis ipsam qui eveniet. Nostrum quasi tempore quis sequi maxime libero.
Odit dolor consequatur voluptatibus quos. Dolore aut quisquam unde fugit maiores. Nihil sit nam error esse illo. Neque numquam neque temporibus et in.
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