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Could you please help me solve this task :)? I am struggling with it.

Heidi Nordstrom is a fund manager for a swedish fund that invests in large cap equities on the exchange in stockholm. The fund management company charges its clients two fees: one fee is fixed in relation to invested capital and one fee is variable in relation to the net income of the fund. The fund charges 2% on the capital of the fund and 20% on returns. (This is often referred to as a 2+20 fee structure) Nordstrom assesses the situation the month before the fees are to be charged. The fund’s equity positions at that time exactly match a broad index of Swedish shares, the OMX Stockholm 30 index (OMXS30). In fact the variable fee has a relation of 1:1 with the index return at the current index price. The variable fee is to be charged by the fund company on the same date as the next option expiration date. The returns of the fund have been good so far, and the variable fee alone would be 10 million Swedish krona had the fee been paid today.

1. The risk manager at the fund management company has also been looking at the position of Nordstrom. He has a different view on the position. The risk manager concludes that if the Swedish index would decrease from its current level by 10% or more, the variable fee would be zero. The risk manager gives Nordstrom the (in)famous “shoulder tap” and asks for the following:

a. An analysis of the strategic choices available to the fund company to manage the variable fee.

b. A graph of the profit as a function of underlying index as of the next expiration date. Explain the details of the graph carefully. What type of instrument does the pay-off function resemble?

Fortunately, the index is very well traded and there is an active electronic market for the derivatives of the index.

2. Find quotes for options that expire at the next expiration date from the NasdaqOMX (www.nasdaqomxnordic.com). Navigate using the “options and futures” tab and then search for “index options and futures”. When you have identified the OMXS30, use the filter function to get the quotes for the next expiration date.

a. Identify the futures price for the OMXS30 index, perhaps using the filter function. A future is an agreement to buy the underlying asset where payment is delayed until a future date. Calculate the number of futures contracts that correspond to as position of 10 million Swedish krona.

b. Nordstrom finds that the entire market risk can be canceled by selling call options. Identify the call option that has a strike price closest to a 10% decrease in index value. Determine how much Nordstrom would receive in fees if she issued the number of call contracts identified in part a. on the bid price. How many options does Nordstrom need to sell to hedge her position?

c. If Nordstrom instead had been able to issue calls on the ask price, how much money would she have received.

d. Compute the overall profit/loss at the expiration date if:

– The OMXS30 is trading at the same price as identified in part a.

– The OMXS30 is trading at a price 10% below the price as identified in part a.

3. Just when Nordstrom is about to execute the trade suggested, she realizes that there is actually another way of hedging her risk using two trades in other instruments.

a. How could Nordstrom hedge her risk without using the call options in question 2?

b. What trades should she execute if she is not issuing call options?

c. Compute the overall profit/loss if:

– The OMXS30 is trading at the same price as identified in part a at the expiration date.

– The OMXS30 is trading at a price 10% below the price as identified in part a at the expiration date.

4. Do the two strategies protect Nordstrom from losing the accrued variable fee? Which one do you prefer and why.

5. By issuing call options, Nordstrom eliminates her risk in relation to the fund. Would you consider that there is a potential agency conflict between Nordstrom and the fund investor?

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Visit the Hunt Library conduct an article research regarding an aspect of airport security in terms of technology, issues, human factors, legalities etc. Summarize the article and correlate the reading to the current module. You must have the proper citation.

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Pair up with a partner to prepare and deliver the presentation:

Find a most fascinating IPO launched in the past decade and prepare a 15 to 20-minute PowerPoint presentation describing an initial public offering for a global firm. MY IPO TOPIC IS “UNDER ARMOUR”

Include the following: The process of issuing an IPO (e.g. the role of the investment banker and underwriter) A discussion of some of the risks involved in the public offering and how the securities laws deal with them Brief background of the company Reasons of the company to go public The initial pricing of the stock and the most recent closing price The fascinating factors of the company Ways to involve the audience

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Questions—Part One 1. a. The Harvard Law Review argued, “In the New Economy (information technology) . . . there will inevitably be an increasing number of markets with only a few dominant players.” 9 Why would that be so? b. Are we mistaken in pursuing Microsoft and other “new economy” giants with “old economy” antitrust principles? Explain. 2. Worldwide Basketball Sports Tours promoted early-season, NCAA-certified basketball tournaments. The National Collegiate Athletic Association’s Two in Four Rule limited college basketball teams to “not more than one certified basketball event in one academic year, and not more than two certified basketball events every four years.” The promoters sued the NCAA on antitrust grounds, claiming the Two in Four rule hampered their ability to make money. The NCAA argued that the limit on games was academically motivated. a. Does antitrust law apply to Division I collegiate basketball? Explain. b. Define the product market in this case. See Worldwide Basketball & Sports Tours, Inc. v. NCAA , 388 F.3d 955 (6th Cir. 2004). 3. a. A traditional concern about monopolies is that a lack of competition discourages efficiency and innovation. Argue that monopolies may actually encourage innovation. b. Even if monopolies do not discourage invention, we have firm economic grounds for opposing monopolies. Explain. 4. Real estate developer Ernest Coleman built an apartment complex in Stilwell, Oklahoma (population 2,700), and ordered electric service from an out-of-town utility, Ozark Electric. Stilwell officials said they would deny him city water and sewer service if he did not buy his electricity from the city-owned utility service. Because he could not buy water or sewer service elsewhere, Coleman decided to switch to Stilwell’s utility. In 1996, the federal Justice Department sued Stilwell. Explain the federal government’s complaint and decide the case. See Bryan Gruley, “Little Town Becomes First Municipality Sued by U.S. for Antitrust,” The Wall Street Journal, June 3, 1996, p. A1. 5. Historically, perhaps the most important interpretation of the Sherman Act’s proscription of monopolization was Judge Learned Hand’s opinion in the Alcoa case. After finding that Alcoa controlled 90 percent of the aluminum ingot market, Hand had to determine whether Alcoa possessed a general intent to monopolize. Hand concluded that Alcoa’s market dominance could have resulted only from a “persistent determination” to maintain control: It was not inevitable that it should always anticipate increases in the demand for ingots and be prepared to supply them. Nothing compelled it to keep doubling and redoubling its capacity before others entered the field. It insists that it never excluded competitors; but we can think of no more effective exclusion than progressively to embrace each new opportunity as it opened, and to face every newcomer with new capacity already geared into a great organization. 10 Comment on Judge Hand’s remarks. 6. Several smaller airlines sued two giants, United and American, claiming that the two violated the Sherman Act through their computerized reservation systems (CRSs). The heart of the plaintiffs’ position was that United and American were monopolists who violated the law by denying other airlines reasonable access to their CRSs. American and United had the largest CRSs, but other airlines also maintained CRSs. Neither had blocked any other airline’s access to its CRS, but they had charged fees (in American’s case, $1.75 per booking to the airline that secured a passenger through American’s CRS). United and American each controlled about 12 to 14 percent of the total air transportation market. According to the court, the plaintiffs were “unhappy” about United and American’s ability to extract booking fees from them for the use of the CRSs. The U.S. Ninth Circuit Court of Appeals ruled for the defendants, and the Supreme Court declined to review this case. a. Explain why the plaintiffs felt wronged by American and United. b. Explain the defendants’s argument that they could not successfully charge “excessive” prices for the use of the CRSs. See Alaska Airlines v. United Airlines, 948 F.2d 536 (9th Cir. 1991), cert. den. 112 S.Ct. 1603 (1992).

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