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FINM2002 Derivatives/FINM6041 Applied Derivatives 2023S2 Mid-term exam
发布时间：2023-09-19
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FINM2002 Derivatives/FINM6041 Applied Derivatives
2023s2 Mid-term exam
Background stories for comprehensive questions
The acquisition of credit Suisse by UBS
On 19 March, 2023, credit suisse, the second largest bank in switzerland, was acquired by its competitor UBs, making the end of credit suisse,s 150-year history.
Before its failure, credit suisse was identiied as one of the 30 Global systemically Im- portant Banks (G-sIBs) by Financial stability Board. The bank,s main business involves investment banking and asset management. It was also one of the major market markers in the global equity and derivatives markets. Actually, credit suisse was relatively less af- fected by the 2008 Financial crisis, while its competitor, UBs, was bailed out by the swiss government at that time. However, its performance, especially the investment banking arm, was rather disappointing after the 2008 crisis, dragging down the bank,s proitability. In addition, to compete with other large international banks, credit suisse made more risky investments.
The bitter consequences for credit suisse started to unfold since 2019. credit suisse sufered from a list of scandals, including big ines from the Us and Uk government for corruption, money laundry and spying. The huge losses (around $8 billion) from its two subsidiary investment funds (Archegos capital and Greensill capital) in 2021 further pushed credit suisse into the brink of failure.
Since middle 2022, rumors about credit suisse had been all over the social media. For example, one past student working in another investment bank told me that the sydney o伍ce of credit suisse was going to be laid of entirely shortly back then. The stock price of
the bank dropped from around $8 to $4 by the end of 2022.
As the year 2023 progressed, the situation of credit suisse continued to worsen due to the depreciation in value of ixed-income assets and the failure of silicon valley Bank. In early March 2023, the bank reported the largest annual loss since 2008 and it failed to receive further support from other institutions or the swiss government. In the middle of March, its stock price saw a steep decline, plummeting to less than $2 and seemingly approaching a value close to zero at any given moment.
On 19 March, UBs agreed to take over credit suisse for $3.3 billion, coordinated by the swiss government with policy support and funding guarantee. In the agreement, the shareholders of credit suisse will receive one UBs share for every 22.48 credit suisse shares held. It is equivalent to around $1 per share, or say 1% of credit suisse,s highest value since 2007.
Credit suisse is one of the latest failure event of major international banks since 2008 crisis. It further worsened the ongoing decline in the stock price of inancial sector. The banking crisis also caused a market-wide concern over the high interest rate and more fun-damentally, the efectiveness of regulation reforms since the 2008 crisis.
Note: The main purpose of the comprehensive questions is to get you engaged with real life events, and apply what we learned in this course to understand inance in a professional way. The stories are given upfront to save your reading time in exam, but not to ask you to do any research beforehand. Actually you can answer most of the questions without reading the story. And you don,t need to use any numbers from the above story to answer the exam questions.
