Prime brokerage transactions: Difference between revisions

Revision as of 17:51, 6 January 2021

Hedge Funds & Prime Brokerage Anatomy™

The classic margin loan, yesterday

The classic stock loan, yesterday

The classic long swap, yesterday

The classic short swap, yesterday

There is no industry standard prime brokerage agreement, so this is not so much an anatomy as a collection of resources about an amorphous subject. Hedge fund \| AIFMD \| Depositary \| Prime broker \| prime brokerage agreement \| synthetic prime brokerage \| margin lending \| custody asset \| CASS Anatomy \| reuse & rehypothecation \| hedge fund \| leveraged alpha \| greeks \| short selling Index: Click ᐅ to expand: Prime Brokerage Securities Financing Investment Strategies

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The classic prime brokerage transactions, illustrated in the panel:

Physical long: A physical long position financed with a margin loan.
Physical short: A physical short position created by selling a stock borrowed under a stock loan.
Synthetic long: A “synthetic” economic equivalent of a physical long position created by entering an equity derivative as a Floating Amount Payer.
Synthetic short: A “synthetic” economic equivalent of a physical short position created by entering an equity derivative as a Equity Amount Payer.

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-{{a|PB|[[File:PB margin loans.png|450px|thumb|center|The classic margin loan, yesterday]]}}
+{{a|PB|[[File:PB margin loans.png|450px|thumb|center|The classic margin loan, yesterday]]
-The classic prime brokerage transaction: a long position financed with a [[margin loan]].
+[[File:PB stock loans.png|450px|thumb|center|The classic [[stock loan]], yesterday]]
+[[File:PB long swap.png|450px|thumb|center|The classic long swap, yesterday]]
+[[File:PB short swap.png|450px|thumb|center|The classic short swap, yesterday]]
+}}The classic prime brokerage transactions, illustrated in the panel:
+*'''Physical long''': A physical long position financed with a [[margin loan]].
+*'''Physical short''': A physical short position created by selling a stock borrowed under a [[stock loan]].
+*'''Synthetic long''': A “[[synthetic]]” economic equivalent of a physical long position created by entering an equity derivative as a {{eqderivprov|Floating Amount Payer}}.
+*'''Synthetic short''': A “[[synthetic]]” economic equivalent of a physical short position created by entering an equity derivative as a {{eqderivprov|Equity Amount Payer}}.
 {{sa}}
 *[[Prime brokerage]]