Chapter 865 The King of Wall Street (5)

   "You have disclosed our agreement to them?"

After a few people walked away dejectedly, Ivana walked in with a sullen face, and the first sentence she said directly to Zhong Shi, "Do you know the consequences of doing this? These organizations were also on our punishment list. , now not only can’t punish them, but also let the whole news leak out!”

  Although she didn't participate in the whole meeting, Ivana only guessed based on the faces of several people when they left that Zhong Shi had already told them the current situation.

  Although I don't know why Zhong Shi did this, Ivana is undoubtedly very annoyed by Zhong Shi's behavior. If she didn't know that the person in front of her should not be forced too much, otherwise she would have punched him long ago.

   "Don't worry, it won't be leaked!"

  Zhong Shi waved his hand disapprovingly, and said, "If I'm not even sure about this, then I definitely won't say it. Don't worry, I'll take care of the whole thing!"

   "Huh, do you have a measure? What do you have?"

Ivana was still relentless, and continued to ask, "Originally we planned to attack Bridgewater Foundation second after you. But now that you make such a fuss, the whole world will know our actions. How else to operate?"

   "Hey, you don't understand people's hearts!"

For this woman's pressing step by step, Zhong Shi felt a headache and wanted to walk away, but after thinking about her background, he had to hold back and explained patiently, "If they leak this news, , causing competitors to take precautions, then their performance will not be so outstanding!"

"Only with outstanding performance can they raise more funds! This market is like this, and funds always flow to institutions with better performance. Even if they want to get more management fees, it is impossible for them to disclose this to others. news."

   "It's still possible to do this?"

  Ivana was stunned for a moment, she opened her mouth wide for a while before she said numbly, "I... I didn't expect that your world is like this."

  She seemed to have the intention of giving in.

   "So if you don't understand, don't talk nonsense!"

Seeing that she was no longer struggling, Zhong Shi sighed and continued, "There is another reason. If any of them breaks in by mistake during our operation and forms a rivalry with us, What should we do then?"

"Although their assets are nothing compared to mine. But once they join hands with JP Morgan, at least they will cause us some trouble. If it is because of this that the overall plan fails, then this responsibility Is it your responsibility or my responsibility?"

"I?"

  Ivana was silent for a while, and finally said in a low voice, "It's better that what you said is right, otherwise... huh... By the way, how are we going to deal with JP Morgan?"

  She changed the topic very cleverly. In the conversation just now, she was completely defeated by Zhong Shi, and she had to find some face in other aspects.

   "You don't understand even if you tell me!"

   Facing the other party’s near-rogue behavior, Zhong Shi shook his head helplessly, and then pressed the call button on the desktop, "Come in, it’s time to discuss how to act!"

   Soon two oriental men in suits and leather shoes walked into the meeting room under the leadership of Jiang Shan.

   "These are the two traders who discovered the problem!"

When seeing Ivana, Jiang Shan shrank his neck involuntarily, but soon he returned to normal, pointed to two traders and introduced to Zhong Shi, "The taller one is Liu Mingren, and the other One is Ou Zhenchu."

  Liu Mingren is in his thirties, about 1.8 meters tall, fair and clean, wearing a pair of rimless glasses, and his body is filled with a strong bookish atmosphere.

  Ou Zhenchu ​​is only about 1.75 meters tall, with dark skin and a strong body. He looks like the kind of person who does regular exercises. With a cropped cut and big, bright eyes, he gave off an energetic look.

   "Zhong Sheng!"

   After the two came in, they nodded to Zhong Shi in unison, with solemn and pious expressions.

  As traders of Tianyu Fund, most of them work in sub-funds. For their legendary boss, they don't have a lot of time to deal with. In addition, Zhong Shi has been traveling all over the world in the past few years, so when they saw Zhong Shi, they still maintained the sense of awe that outsiders looked up to.

   "Okay, it's all my own!"

Zhong Shi is already accustomed to this kind of treatment. After waving his hands at the two of them, he immediately said, "Don't come to the way of outsiders. Tell me what you have discovered and what is the logic in it. In addition, you How do you determine that this phenomenon is manipulated by JP Morgan behind the scenes?"

"OK!"

  The two of them just hesitated for a moment, and soon got into work. One of them started to fiddle with the delivery machine, and the other took out a document from his briefcase and delivered it to Zhong Shi.

   "The thing is like this, I believe everyone knows the CDX index and IG contract!"

After a while, a series of charts and figures were displayed on the screen on the wall. Liu Mingren, who was in charge of the explanation, cleared his throat and began to say, "It is generally believed that the IG9 contract is the most liquid among the CDX contracts that have been issued in the market. One, because it was the last index released in September 2007, many structured products are priced with IG9."

"However, after calculating the fair value of the IG9 contract, we found that the average price of the company's CDS has a large difference between the price of the IG9 contract and the index. In other words, there is room for arbitrage between the two. .”

   "Wait, what is the difference between the price of the IG9 contract and the average price of the company's CDS in the index?"

Liu Mingren had only spoken a few words before being interrupted by Ivana. Ivana was dizzy from the endless jargon coming out of the other party's mouth. He asked with a scalp, "What does arbitrage mean?"

   "..."

  Liu Mingren was very surprised. Originally, he thought that the other party must be a professional since she appeared here, but from her questioning, it can be seen that this beautiful woman doesn't understand anything.

  He was a little bit at a loss at this time, and his panicked eyes quickly turned to Zhong Shi and Jiang Shan, but the two seemed indifferent, and they didn't express at all. At the moment, he had to bite the bullet and patiently explained to Ivana, "The so-called fair value of the CDX index contract refers to the average price of a single CDS of all companies in this index. When the CDX index was set up, it was like this. However, it can be seen from the model calculation that the average price of a single company’s CDS deviates greatly from the price of the CDX index, and this is where the problem lies.”

"As for the so-called arbitrage, it means that when this happens, the market will buy cheap CDS and sell the more expensive CDX index, so as to take the difference. This is the so-called arbitrage. In the end, the CDS The average value of and the price of CDX tend to be consistent until there is no possibility of arbitrage. It should be noted that arbitrage is common in every market, but on the IG9 contract in the CDX market, arbitrage activities do not even out the two The price difference between the two parties has always existed, and it is far greater than the deviation of other contracts."

"What is even more surprising is that on the IG9 contract, the open position did not decrease gradually over time, but increased dramatically. The magnitude of this increase shocked the entire market. Because of the magnitude of its growth It has exceeded 50%, and the total value has jumped directly from US$90 billion to US$150 billion, which is more than any other IG contract.”

   "I seem to understand a little bit!"

Ivana tilted her head and thought for a while, then suddenly interjected, "You mean someone is manipulating the market so that the prices of the two are not consistent, is that so? But what I don't understand is why they want to Is there any other conspiracy to manipulate the market?"

   "You're right!"

Liu Mingren was quite satisfied with Ivana's reaction this time, and couldn't help boasting, "It's true, we think someone is manipulating the price difference between the two in the market for the purpose of profiting from another market." .”

   "Let's look at this graph!"

While speaking, Liu Mingren switched the screen to another picture, "Because of the debt crisis, the market generally believes that the recent situation will deteriorate, but the long-term situation will improve, which will trigger a very interesting situation. Phenomenon. That is, the price of CDS will rise in the short term, but in the long run, the price will fall.”

"So a game was invented in the market, which is to use long-term and short-term contracts for hedging to earn this part of the price difference. Because the buying and selling prices are similar, so what they pay is almost the same as what they earn. In the long run In the future, the price of CDS in the near five years will gradually fall, while the price of CDS in the forward ten years will gradually rise. From this moment on, the price difference between the two parties will gradually narrow. In theory, this price difference is almost risk-free Arbitrage, because even if there is risk, it will be hedged by buying and selling."

"However, selling the recent high-priced contracts and buying long-term low-priced contracts, and then earning the difference between the two yield curves in the future when the two yield curves gradually parallel, this kind of transaction is sure to make money. As stated above, all risks and even costs were hedged, which is why the notional value of the IG9 contract skyrocketed."

"It is conceivable that there is a giant in the market who is constantly conducting such risk-free arbitrage transactions, so that the nominal value of the IG9 contract is continuously expanded. Originally, it was impossible for us to know this kind of position, because it is an over-the-counter market. , the position information is impossible to disclose. However, according to the arbitrage activities related to another market, we found that the arbitrage activities in this market could not even out the price difference that should not exist, so we knew that the position in this market was large. According to my It is estimated that at least hundreds of billions of dollars are needed to completely nullify the arbitrage activities in another market."

At the end, Liu Mingren shrugged and said with an exaggerated expression, "This is completely the impact of one market on another market, and it is a volatility arbitrage that is difficult to notice on weekdays. If this matter is compared to a case, It is equivalent to a person killing someone, and the splashed blood accidentally fell on another person, and we finally discovered the truth of the whole thing after tracking the drop of blood."

  He compares himself to the police, and is obviously quite satisfied with the results of his tracking of market clues.

   "But how are you sure JP Morgan is behind it?"

After hearing so much, Ivana barely understood, but there was one last question, "Is it impossible to be another institution? For example, Bank of America, or Citibank, or something else A messy institution?"

"good question!"

Ou Zhenchu ​​nodded, took over the topic and said, "Abandoning the arbitrage move, just say that the original purpose of this strategy must be to protect the bond position. Compared with CDS, its price is cheaper, and it can protect the bond position." There is more exposure, there is no doubt about that.”

"Looking at the entire market, there are many companies that need to protect their bond exposure, but such a large bond exposure can basically be counted on one hand. In addition, they themselves are one of the largest bond issuers One, so we have reason to think that only JP Morgan would do that."

   Thanks to book friends Riverside’s feet, Cyclone, and I, Little Dust, for voting monthly! It is not easy to clarify these theories and then express them, but fortunately, it did not take too long. I hope that more book lovers will pay attention to and support this book. Thank you~

  

  

  (end of this chapter)