In the 1980s, Michael Milken was known in Wall Street as the "The Junk Bond King". A junk bond, also called a high-yield bond, is a corporate debt instrument that has a high probability of default, but provides a potential high rate of return. Milken, who worked at investment bank Drexel Burnham Lambert, was by far … Continue reading The collapse of Drexel Burnham Lambert: a story of insider trading and greed
The Securities and Exchange Commission, better known as SEC, is a US independent, federal government agency responsible for protecting investors and maintaining fair and orderly functioning of securities markets. Created in 1934 with the Securities Exchange Act, after the Great Depression started in 1929, as the first federal regulator of financial markets in the United States, … Continue reading What is the Securities and Exchange Commission?
In the last twelve months Bitcoin has surged as one of the most known instruments on financial markets worldwide, raising in value from $700 on the dollar in November 2016 to more than $10,000 exactly one year later. Bitcoin is a cryptocurrency, that is, a digital or virtual currency, wholly without a physical presence. A … Continue reading The bubble of the decade? Cryptocurrencies
A hedge fund is an alternative investment vehicle that employs numerous different strategies in order to achieve a positive return, called "alpha", for its investors. These kind of funds are actively managed and they usually make use of derivatives and high leverage with the goal of enhancing profits from trades. Hedge funds are generally only accessible … Continue reading What is a hedge fund?
Long-Term Capital Management, also known as LTCM, was a large hedge fund, started in 1994 by John Meriwether, former vice chairman and head of bond trading at investment bank Salomon Brothers, with the intent of providing investors with absolute returns using trading strategies combined with high financial leverage. Alongside Meriwether, the fund was led by … Continue reading The rise and fall of Long-Term Capital Management
A Ponzi scheme is a fraudulent investing system promising high rates of return with little risk to investors. In brief, a Ponzi scheme generates returns for older investors by acquiring new investors. In this, a Ponzi scheme is similar to a pyramid scheme, since both are based on using new investors' funds to pay the earlier ones. Companies that engage … Continue reading What is a Ponzi scheme?
A short position, usually simply called short, is an investment or speculative strategy where an investor sells shares of a borrowed stock in the market. The investor expects that the price of the stock to decrease over time, so that in the future he will be able to purchase the shares in the open market … Continue reading What is a short position?