Analysis of the Wall Street movie

October 30, 2020 by Akshit GUPTA

Analysis of the Wall Street movie

This article written by Akshit GUPTA (ESSEC Business School, Grande Ecole Program – Master in Management, 2019-2022) analyzes Wall Street movie.

Analysis of the Wall Street movie

The Wall Street movie released in 1987 is an American drama film based on the life of a junior stockbroker aiming to work with a major Wall Street player in America.

The movie has been regarded as the most iconic film of the 1980s throwing light on the capitalistic trading mentality existing in one of the world’s largest financial markets. It replicated the drastic changes that daring corporate raiders introduced in the financial system. It focuses and enlightens us on concepts of a financial market that we observe in our daily life, which also correlates with some of what we study in the SimTrade course.

Wall Street movie

Key Characters in the movie

Bud fox, a junior stockbroker
Gordon Gekko, A famous Wall Street investor
Lawrence Wildman, a corporate raider
Carl Fox, Bud’s father and a mechanic at Bluestar Airlines

Summary of the Wall Street movie

The movie starts by introducing a character named Bud Fox, who is a junior stockbroker at Jackson Steinem & Co, a New York City-based firm. Aspiring to work with one of the leading Wall Street players named Gordon Gekko, Bud Fox visits Gekko’s office carrying a box of contraband Cuban cigars on his birthday.

In response to Bud’s gesture and courage, Gordon Gekko offers him an opportunity for an interview that Bud has always longed for. Being unable to impress Gekko, Bud takes the extra step and plays his last card. He imparts some inside information about Bluestar Airlines to Gekko which he overheard from his father.

Impressed by the act, Gekko ends up placing an order for Bluestar Airlines’ stocks and becoming one of Fox’s clients. Over the next few months, Fox made several stock deals for Gekko but none showed an increase. Furious Gekko offers a last chance to Bud for him to keep his job. Desperate to continue working with Gekko, Fox agrees to spy on a British CEO and a corporate raider, Lawrence Wildman, and discern his upcoming plans of investments. By following him, Fox learns about an investment Wildman is planning to make in a major steel company named Anacott and take the controlling interest. By leaking the news in the press, Gekko buys the controlling shares before Wildman and sells him the same for a lucrative profit.

The deal leaves Bud significantly rich and provides him with a lot of additional perquisites. He goes on to engage in illicit trading activities and makes a lot of money for Gekko and himself. In the dark, Bud does not realize that he is being put on the hotlist by the SEC.

Bud pitches a plan to Gordon Gekko, which is to expand the Bluestar Airlines after buying it. Bud does all in his power to push the deal through. But in no time he learns about the plan Gordon has, to sell all the assets once the stock peaks, thus leading the company in ashes. Being racked with the guilt of leading all the employees into unemployment, Bud plans to manipulate the stock. He also arranges for a secret meeting with Lawrence Wildman and convinces him to buy a controlling stake in Bluestar Airlines with a significant discount.

On the execution day, Gordon Gekko, realizing that his stocks are plummeting, gets rid of his remaining stake in the company on Bud’s advice, ending up in losses. But soon, Gekko finds out about the plot set up by Bud Fox and Wildman to deceive him.

To teach a lesson to the young broker, Gekko informs the SEC about the insider trading and unethical practices undertaken by Bud Fox to make illicit gains. However, Bud ends up cooperating with the SEC to get a lighter sentence and helping SEC arrest Gordon Gekko.

The relevance of the Wall Street movie for the SimTrade course

The SimTrade course focuses on the concepts of observing the market news and using types of orders to trade and create value at the end of the trading period, which of course goes into detail. The movie correlates with the concept of market efficiency where it shows that the market functions as a semi-strong efficient market at best. Since private inside information is not embedded in the market price of the stock, there is a possibility to make gains higher than the market gains by bringing it into use. It also shows how demand and supply play a fundamental role in any financial market, driving the prices in either direction. Moreover, it establishes the importance of a buyer, a seller and a common trading platform for a transaction to occur.

The ending of the movie is quite relevant portraying how illicit and unethical behavior is dealt with in present-day markets. It also shows how effective measures have been put in place by governments throughout the world to provide traders with a transparent and efficient financial market.

Famous quote from the Wall Street movie: « Greed is good »

Watch Gordon Gekko explaining « Greed, for the lack of a better word, is good » to the shareholders during the General Meeting of their company.

Trailer of the Wall Street movie

About the author

Article written in October 2020 by Akshit GUPTA (ESSEC Business School, Grande Ecole Program – Master in Management, 2019-2022).

Analysis of The Hummingbird Project movie

October 30, 2020 by Akshit GUPTA

Analysis of The Hummingbird Project movie

This article written by Akshit GUPTA (ESSEC Business School, Grande Ecole Program – Master in Management, 2019-2022) analyzes The Hummingbird Project movie.

Analysis of the movie

Also known as The Wall Street Project, the Canadian movie was released in 2018 featuring the evolution of high frequency trading and ultra-low latency direct market access (DMA) in one of the most developed financial markets in the world. The name ‘The Hummingbird Project’ is well suited as it relates to the time a hummingbird’s wing takes to beat. The title of the film impeccably connects with the project the movie is based upon. The movie portrays how the line between success and failure is sometimes very thin. It correlates with the SimTrade course as it teaches us how to make use of technology in markets and stay ahead of others.

Summary of the movie

The The Hummingbird Project movie starts by presenting Mr. Vincent Zaleski, a stockbroker working for Eva Torres, keen on convincing Mr. Bryan Taylor, an investor, on investing in his idea of installing fiber optic cables between the Kansas Stock Exchange and the New York Stock Exchange, at a distance of approximately 1,000 miles, to front-run the orders into the system giving a time benefit of at least 1 millisecond. The high frequency trading operation would have led to an increase in profits by millions of dollars.

Buying into Vincent’s idea, Mr. Bryan shows his faith in him. In order to execute the plan, Vincent convinces his cousin Anton Zaleski, a genius programmer, to resign from their current stockbroking firm, owned by Eva Torres, and work tirelessly to achieve the new feat.

Both the brothers start working on their dream project with Anton handling the technical aspects of the technology of improving his previously coded software and Vincent working on the ground for the installation of the fiber optic cables. Anton has previously coded a software that had the capability to run trades in 17 milliseconds and now, it is required to be brought below 16 milliseconds in order to gain from the system. Since success doesn’t come easy, they encounter many difficulties in attaining their dream.

Meanwhile, Eva becomes aware of their dream project and threatens Anton against using the proprietary software he developed while working for Eva. She also finds a student, at New York University, who wrote a research paper on boosting high-frequency trading using microwave pulses. Seeing a chance to beat Vincent and Anton, Eva immediately hires the student and begins with the building of a series of cell towers to make trades using microwave pulses. As a revenge for deceiving her, Eva gets Anton arrested by the FBI under charges of stock market fraud of utilizing proprietary software owned by Eva’s company.

While Vincent struggles with the digging and the installation of the cables, Eva’s company starts their operations using the microwave impulses, and thus, the front runs the market. Meanwhile, Anton being furious with the arrest unwinds a bug that he has installed in the software, used at Eva’s company, which results in a 20 second slowdown in the high-frequency trades leading to losses of millions of dollars. In order to regain access to her system and save her company, Eva agrees to take back the charges against Anton.

Due to delays and an unforeseen health condition, Vincent fails to roll out his fiber optics project resulting in losses to the investor.

The movie ends with Anton introducing a new idea to his cousin which can bring down the processing time to 9 milliseconds, named neutrino messaging.

Relevance to the SimTrade course

The The Hummingbird Project movie perfectly blends with the structure of present-day financial markets and shows how in just a matter of a few seconds, a person can gain or lose a great fortune. The concepts taught in the movie deals with ‘High-Frequency Trading’ and ‘Direct Market Access’ which are relatively new. These correlate with the courses on exchanging orders and market makers in the SimTrade course. These orders, if executed at ultra-high speed, can help in bringing liquidity to the market and narrow the bid-ask spread. If applied with great precision and knowledge, a trader can earn big fortunes using high-frequency trading which is changing the face of financial markets.

Most famous quotes from the movie

“But the thing is, if all traders use the same system, and have the same information, how do you beat the others? By having the fastest line” – Anton Zaleski

“High speed is not our priority. We don’t believe that making things faster makes things better.” – The Amish guy

“One millisecond faster!” – Anton Zaleski

Trailer of the movie

About the author

Article written in October 2020 by Akshit GUPTA (ESSEC Business School, Grande Ecole Program – Master in Management, 2019-2022).

The Tulip Mania

February 4, 2024October 27, 2020 by Akshit GUPTA

The Tulip Mania of 1636

This article written by Akshit Gupta (ESSEC Business School, Grande Ecole Program – Master in Management, 2022) analyzes the Tulip Mania.

Introduction

The Tulip Mania or commonly referred to as The Tulip Craze is an event that took place in Northern Netherlands in the first half of the 17^th century wherein the prices of bulb of tulips skyrocketed, giving rise to a speculative bubble, and crashed all of a sudden affecting the entire Dutch economy. The first evidence on the occurrence of this mania was presented by Charles Mackay in his book Extraordinary Popular Delusions And The Madness of Crowds released in 1841. Tulips were introduced in the Netherlands during the 1590s and were primarily imported from Turkey. Initially, the buds were so rare that it became an item of luxury and only affluent people were able to procure it. It soon became a status symbol among the rich people with new demand arising from the middle-class merchants to match the upper-class status. With professional cultivators coming in the early 17^th century, new techniques were evolved to grow tulips in the home soil, thereby establishing a booming business sector.

The Tulip Mania

Tulip Mania

Before 1635, the exchange of tulip bulbs was restricted between the professional growers and affluent richer class but sooner the ordinary people started demanding these luxuries. The local cultivation of the flower leads to the evolution of a new variety of buds named ‘broken bulb’ which is believed to be the primary catalyst resulting in exorbitantly high prices of tulips and the creation of the speculative bubble. Middle-class people started spending their annual salaries to buy these rare bulbs in expectation of selling it for a higher profit.

The rare tulip bulbs are believed to be priced at six times the annual salary of an average person at the peak of the crisis. Assets were kept as mortgages to buy rights for these rare bulbs and later sell it at a higher price. However, the craze wasn’t long sustained as within a year people started doubting the extremely high prices, and within a matter of a few days, the entire structure crashed leading to an economic downturn. Many ordinary people have been believed to go bankrupt, deprived of their entire fortunes. The Tulip Crisis is regarded as the first such financial bubble which has happened to exist in the recorded history.

Relevance to the SimTrade course

The lesson learnt from such a crisis very well blends with the courses taught in the SimTrade course. A speculative bubble comes into existence when the market behavior drives up the asset prices exorbitantly and the fundamentals of an asset nowhere match such an upsurge. The crisis teaches us the pivotal role demand and supply play in bringing volatility to the markets. In the tulip craze, the intrinsic value of the commodity is no way near the market price for such trades. To invest wisely, an investor has to take into consideration the intrinsic or fair value of an asset in order to stay away from such bubbles that come into existence time and again. The concepts of value investing as proposed by Benjamin Graham should always be practiced to select a winning trade.

Useful resources

Extreme Events in Finance

About the author

Article written by Akshit GUPTA (ESSEC Business School, Grande Ecole Program – Master in Management, 2022).

Analysis of Other People's Money movie

October 27, 2020 by Akshit GUPTA

Analysis of Other People’s Money movie

This article written by Akshit Gupta (ESSEC Business School, Grande Ecole Program – Master in Management, 2019-2022) analyzes Other People’s Money movie.

Other People’s Money is an American comedy-drama film launched in 1991 based on a play written by Mr. Jerry Sterner. The story replicates the existence of a corporate takeover and presents arguments both in favour of and against such moves. There have been stories of many selfish people existing in the financial system, stealing jobs and leaving lives tarnished using hostile takeovers. But the arguments presented in this movie will make you think twice about the actions of corporate takeover and the rationale behind them.

Summary of the movie

opm

The movie starts by introducing a corporate raider named Lawrence Garfield, or commonly known as ‘Larry the Liquidator’, who is well known for buying over companies and selling off their assets. He uses a computerized stock analysis program named Carmen to select targets for his next takeover. With the stocks of New England Wire and Cables rising, the algorithm presents this company as a new target for Larry. The company is a second-generation firm run by Mr. Andrew Jorgenson (called Jorgy) and has three major divisions with wire and cable division under losses for many years. The hard work put in by Jorgy has made his company perform reasonably well with no debts and ample cash reserves. Impressed by the company’s financials and its stock price being undervalued, Larry poaches the chairman, Jorgy, with a takeover offer which he denies. However, determined to purchase the company, Larry starts purchasing shares from the open market driving up the stock price from $10 to $14 and filing Statement 13-D which states the purchase of a minimum of 5% of common stock ownership in a company. Becoming aware of the filing, Jorgy reaches out to her daughter named Katy Sullivan, a corporate lawyer, to protect the interest of his company from such a hostile takeover attempt.

Kate, taking immediate action, brings in an injunction to stop Larry from any further purchase of shares, based on a technicality, till the matter gets settled. Larry complains about such moves hampering the spirit of a free society and capitalism by preventing speculators like him to purchase shares.

To provide for an out of the court settlement, Kate proposes a greenmail offer to Larry which will be a win-win for both the parties, but it eventually gets declined.

Unable to reach a settlement, Larry and Jorgy decide to leave the judgment upon the shareholders by calling for an Annual general meeting and having a proxy fight.

During the AGM, Jorgy appeals and tries to sway the shareholders with his heartfelt speech where he claims of caring more for the employees and their loyalties to his company rather than money. He ridicules the concepts of maximizing shareholder wealth and says that a company is far more than its stock price. But, Larry becomes successful in convincing the shareholders about the benefits of a takeover and how he can provide them with a very good price for their shares. In the end, the proxy voting is won by Larry, giving him the controlling interest in the company and leaving Jorgy feeling betrayed.

The movie concludes with Kate bringing up a business contract to Larry for manufacturing airbags, offered to New England Wire and Cable company by a Japanese company. She proposes to buy back the company from Larry at a mutually negotiated price.

Relevance to the SimTrade course

The topics introduced in this movie correlates with the courses taught on SimTrade platform. The SimTrade course teaches us the concept of market information and the movie exhibits how such information is put to use to make decisions about buying or selling of stock. The movie also portrays how demand and supply play a primary role in bringing momentum in a market.

A new concept introduced in the movie deals with the use of greenmail, which is a defense mechanism adopted by companies to prevent takeover attempts. Under this mechanism, the target company repurchases the shares at a higher price, to retain the control. Also, the movie shows the importance of value investing by using the fundamentals of a company to determine whether the company is under or overvalued compared to the market price.

Most famous quotes from the movie

“Someday, we’ll smarten up, change some laws, and put you out of business.” – Kate Sullivan

“They can pass all the laws they want. All they can do is change the rules. They can never stop the game. I don’t go away. I adapt.” – Lawrence Garfield

Trailer of the movie

About the author

Article written by Akshit GUPTA (ESSEC Business School, Grande Ecole Program – Master in Management, 2019-2022).

Analysis of the Barbarians at the Gate movie

January 2, 2024October 27, 2020 by Akshit GUPTA

Analysis of Barbarians at the Gate movie

This article written by Akshit GUPTA (ESSEC Business School, Master in Management, 2022) analyzes Barbarians at the Gate movie.

Analysis of the movie

Barbarians at the Gate (1993) is a television movie based on a best-selling book by Bryan Burrough and John Helyar. The movie focuses on the leveraged buyout of RJR Nabisco that took place in 1988, making it the largest buyout till that date. It is a classic example of the takeover spree occurring in the financial system at that point in time and how the battle for taking control of a company ended up with a whopping deal value of $25 billion. The movie teaches us some really important lessons on corporate greed and the execution of multi-billion dollar deals.

Summary of the movie

The movie starts by introducing F. Ross Johnson, the presiding president and CEO of RJR Nabisco, a tobacco and food company headquartered in New York City. The tobacco division of the company has been working busily on the development of a smokeless cigarette named ‘ Premier’, the introduction of which is believed to drive up the stock prices of the company which have rather been sluggish for a long time.

Ross’s friend Don Kelly introduces him to a banker named Henry Kravis, who has helped Don carry out a leveraged buyout for his company and is an expert in LBOs.

Due to negative feedback received during market sampling of Premier, Ross decides to take the company private in order to save it from further stock dips and public embarrassment. He considers leveraged buyout as a potential way to pay his shareholders, by keeping the business of his company as collateral. To carry out the buyout, he hires Shearson Lehman Hutton (a division of American Express) as his primary banker, with Peter Cohen leading the charge. Ross initially bids $75 per share (amounting to $17.6 billion in total payables) to the Board of Directors, much higher than the current market price of $53, to attract the shareholders.

Since the idea of a leveraged buyout was introduced to Ross by Henry Kravis, he doesn’t like the act Ross carried by going behind his back and hiring another firm to look after the takeover. Although Kravis didn’t have substantial financial information regarding the company, he gives an offer of $90 per share amounting to a total cost of $20 billion, giving rise to a bidding war. A series of negotiations start with many major wall street bankers and lawyers swamping Ross with their offers. Meanwhile, the confidential offer details presented by Ross gets leaked in the media, bringing negative publicity for him.

With Ross and Kravis unable to come up to a settlement, final offers are asked for by the Board of Directors to be presented in the general meeting. Although Ross submits an offer of $112 per share, Kravis’s offer of $109 per share is taken into consideration and gets accepted by the Board. The Board justifies their move by showing a leaked article in the New York times stating $2.5 billion in profits Ross’s management company would have made by taking a 20% stake in RJR Nabisco. Ross wanted to own the company to continue enjoying the lucrative benefits and not for increasing its shareholder value. The Board became aware of his intentions and decided to go with the private equity firm, which is referred to as ‘Barbarian’ in the movie title.

Relevance to the SimTrade course

The concepts shown in the movie correlates to the courses taught on the SimTrade platform. The movie portrays the importance that company-specific news plays in deciding the stock price movements. The courses taught on SimTrade also teaches us to focus essentially on the current financial news to benefit from it. The movie showcases the typical acquisition of a company by the use of leverage buyout and how the buyout wave started in the early 1980s. In a financial context, a leverage buyout refers to an acquisition of a company, division, or business using a large portion of borrowed funds or debts to finance the transaction. They are often considered to be good for acquiring a company but in certain circumstances, LBOs can also leave a company with a great pile of debt to repay. The movie is also a perfect example of things that money can’t buy which includes trust, loyalty, and respect.

Most famous quote from the movie

“It’s not the company. It’s the credibility. My credibility. I can’t just sit on the bench and let other people play the game. Not my game. Not with their rules.” – Henry Kravis

Trailer of the movie

Useful resources

SimTrade course Financial leverage

About the author

Article written in December 2021 by Akshit GUPTA (ESSEC Business School, Grande Ecole Program – Master in Management, 2019-2022).

The Great Stock Market Crash of October 1987

October 27, 2020 by Akshit GUPTA

The Great Stock Market Crash of October 1987

This article written by Akshit Gupta (ESSEC Business School, Master in Management, 2022) analyzes the Great Stock Market Crash of October 1987.

Introduction

A stock market crash refers to an abrupt drop in the prices of a major stock index, triggered by a drop in underlying stock prices, resulting from speculations, investor panic, or an economic crisis. 6 major stock market crashes have been recorded in the United States till date where the indexes have tumbled more than 10% in a single market day. Known as the Black Monday, the stock market crash of 19^th October 1987 has been regarded as the most significant or largest single-day fall in the history of US markets. The day was dominated by aggressive selling and situation of great investor panic across the country.

The stock market collapse of October 1987

Late 1985 onward, the US markets started to gain momentum after prolonged years of slow growth and economic recession. The financial systems also saw a heightened level of M&A activity with leverage buyouts becoming the new norm. The use of leverage started to be extensive in all areas of the system. In August 1987 the markets peaked with DJIA standing at 2,722 points, up 44% from the same time during the last year. Some investors became concerned about an existing stock bubble or a near term market correction. A new investment strategy named portfolio insurance started gaining traction from many big institutional investors, as a way to hedge their bets in case the market tumbles.

This strategy used algorithm-based trading and relied on the use of options and futures to safeguard an investor’s money. Also, the presence of risk arbitrage or merger arbitrage, who were making profits from announced M&A deals, was on a rise.

On 13^th October 1987, an anti-takeover bill was introduced in the US by the House Ways and Means Committee, placing restrictions on takeovers and corporate restructuring resulting in lower investor sentiments and a break on the then-active M&A environment as a result of higher interest rates due to a larger trade deficit. The leveraged risk arbitrage traders started unwinding their positions owing to fears of failing M&A deals. The selling continued till 16^th October 1987, when investors started selling their positions to avoid further margin calls. Due to the newly introduced globalization and intertwining of global exchanges, when markets opened on Monday, sharp selling in the US market resulted in a chain effect affecting all the major stock exchanges across the world.

On the day of 19^th October 1987, also known as ‘Black Monday’, the indexes across all the major stock markets across the world took a big hit and the U.S. Dow Jones Industrial Average lost 23% of its value in a single market day. The crash was exuberated by the presence of algorithm-based trading, as the sell orders spiked when a target price was breached. As a result, mutual funds started unwinding their positions triggered by increased mutual fund redemptions. The fall in the spot market was followed by a fall of the futures and options markets as a result of excessive short selling by portfolio insurances to hedge the decline in stocks. The intensity of the total trading volume can be gauged by the fact that computerized systems like SuperDot at NYSE failed and were shut down for a prolonged period of time.

The event was a result of high selling pressure continuing for the past several days before the crash day. Although the exact reason for such a crash is difficult to comprehend, it is believed that high-interest rates, the introduction of an anti-takeover bill, algorithm-based trading, and intervention of portfolio insurances are the reasons that led to this forced selling and the biggest crash recorded in the history. The crash brought fears of prolonged economic instability and recession across the world.

After effects of the stock market crash

The significant losses incurred on Black Monday weren’t followed by times of economic recessions. The markets regained their momentum by 1989 and recovered most of the lost value. After the crash of 1987, strict measures were adopted by all the major stock exchanges around the world, to prevent such events from happening again. A new mechanism known as ‘circuit breakers’ was introduced to curb any such sudden declines in the market. Under this new system, exchanges halt the trading for a short duration of time, if the markets experience any such large decline in the prices. To bring liquidity to the market, Open Market Operations were carried out by the Fed to increase the supply of money. Also, other preventive measures were adopted to rectify the market irregularities that led to investor confusion and delay in information processing.

Potential impact of market crashes

The occurrence of such a catastrophic event decreases investor confidence and the after-affects stay for the following many years. As per the wealth effect, consumer spending decreases following such crashes as an individual becomes more hesitant to spend money. The crash of 1987 had a negative impact on the wealth of many individuals, eroding lifetime savings many investors.

Also, as pension funds invest significantly in the stock market, a prolonged decline in the stock prices reduces the value of these funds, thereby effecting the payout capabilities. If the fall in the prices is long-term, the pension income for many households decreases, thus reducing the overall spending power in the economy.

Article written by Akshit GUPTA (ESSEC Business School, Master in Management, 2022).

Analysis of The Rogue Trader movie

October 26, 2020 by Akshit GUPTA

Analysis of The Rogue Trader movie

This article written by Akshit Gupta (ESSEC Business School, Grande Ecole Program – Master in Management, 2019-2022) analyzes The Rogue Trader movie and explains the related financial concepts.

Rogue Trader (1999) is a British drama film depicting the life of Nick Leeson, a former derivate broker based out in Singapore. The story is inspired by real-life events that shook the global financial system and led to the collapse of the world’s second-oldest merchant bank named Barings Bank based out in England. The movie is based on a book by Nick Leeson named Rogue Trader: How I brought down Barings Bank and shook the financial world and is one of the greatest examples of why a trader shouldn’t try to fight the market.

Summary of the movie

The Rogue Trader movie

The movie starts by introducing Nick Leeson, a person who starts his career by working for Barings Bank in Indonesia and is later promoted to work as a derivatives trader at the trading seat of the bank at Singapore International Monetary Exchange (SIMEX), Singapore. He was made to look after the trades as well as the back office work of and entering and settling those trades by the end of the day. His job is to trade futures contracts based on Nikkei 225, a stock index at Japan Stock Exchange, on behalf of Baring’s clients, and generate profits by arbitraging the small price difference between SIMEX and Japan Stock Exchange. He hires a team of people to be the floor traders for him and imparts them requisite training for executing the orders. Everything seemed fine until, owing to a trader’s error, Nick accrues a small loss. To cover the losses made by the trader, Nick starts trading futures under a newly formed account numbered 88888, an unauthorized account, which is prohibited under the bank laws. Soon, his trades start falling apart and he starts incurring losses amounting to millions of pounds. To conceal the facts from his seniors, Nick lands up a big client and makes enough commission on his trades to make up for the losses. But since he wanted to play big, instead of making profits by arbitraging his positions, Nick starts to hold on to his positions in expectations of higher future prices.

However, his unhedged positions start pouring in heavy losses when a major earthquake hits Japan in 1995 and the stock market starts dwindling. Still determined to cover his losses, Nick starts buying Nikkei futures in large quantities and tries to move the market in his favor. To meet the margin calls, Nick asks the head office in London to wire him more money to enter bigger deals. But as the market keeps on falling, the losses start amounting to hundreds of millions of pounds. The management of the bank remains oblivious of the losses that are accumulating in the account number 88888, which is an account operated under a client’s name. Barings back had a poor compliance system and regular audits weren’t carried out in a proper manner giving rise to losses amounting to 800 million pounds, almost double the amount of capital Barings had.

As the market keeps going against him, Nick realizes that his game is coming to an end. Nick and his wife plan to leave Singapore to save him from judicial actions. But eventually, Nick is caught at Frankfurt airport and deported to Singapore where he is sentenced to 6 years’ imprisonment.

Relevance to the SimTrade course

The lessons learnt from the movie Rogue Trader are correlated to courses taught in the SimTrade course. The importance of market news has correctly been reflected in the movie by the amount Nick had to pay, trying to fight the trend. The strategy used by Nick to cover his losses known as Martingale’s strategy, or doubling the bets, is a very common mistake traders make in order to cover their past losses, but most of the time it results in even higher losses. A trader should never try to fight the market since it is rightly said that markets are always right, even when they are wrong.

The courses taught on SimTrade teach traders to cover their positions by using different types of orders to protect them from any unexpected market movements. If a stop loss/stop limit strategy would have been entered in by Nick, the losses could have been cut down. A proper investment plan with adequate use of margins and a stop-loss strategy should be put in place by every trader before entering trades. Also, a good trader should never let emotions, such as fear or greed, dictate her judgment.

Most famous quotes from the movie

“I just have to keep buying futures to support the market. If it sticks at 18,000 my options are still in the money. I could get the position back. I may even out ahead.” – Nick Leeson

“Listen to me now. You don’t fight the market!” – Another trader

“The way the market’s going, your losses could be catastrophic.” – Another trader

Trailer of the movie

▶ Marie POFF Film analysis: Rogue Trader

▶ Jayati WALIA Quantitative risk management

▶ Alexandre VERLET Understanding financial derivatives: futures

▶ Akshit GUPTA Futures Contract

About the author

Article written in October 2020 by Akshit GUPTA (ESSEC Business School, Grande Ecole Program – Master in Management, 2019-2022).

Analysis of the Margin Call movie

January 30, 2024October 26, 2020 by Akshit GUPTA

Analysis of Margin Call movie

This article written by Akshit Gupta (ESSEC Business School, Master in Management, 2022) analyzes Margin Call movie and explains the related financial concepts.

Margin Call (2011) is an entangling American drama movie based on the events that took place within an investment bank during the financial crisis of 2008. The movie mirrors the impact of high exposure to Mortgaged Back Securities (MBS) that prevailed across big banks and depicts the events that lead to a near fall of an unnamed investment bank based out in New York City. It provides a very good analysis of the present financial system and throws light on the working of some large financial institutions.

Key characters in the Movie

Eric Dale- Head, Risk Management Department
Peter Sullivan – Junior Analyst, Risk Management Department
John Tuld – CEO of the Bank
Sarah Robertson- Chief Risk Management Officer
Jared Cohen- Divisional Head
Sam Rogers- Floor Head

Summary of the movie

Bolier room movie

The movie begins by introducing an unnamed investment bank where, owing to decreasing profits, 80% of the staff is getting laid off. Eric Dale, director of the risk management team, is one of the victims of this layoff. Before leaving the office Eric hands over a USB, which contains important analysis that he has been carrying out, to his junior named Peter Sullivan and asks him to complete the model with proper care. During the night, Peter finishes the model and discovers information that has the potential to bankrupt the entire firm. As per the model, the firm was over-leveraged and has even crossed historical volatility patterns many times in the past couple of weeks. If the market value of the firm’s risky assets drops by 25%, the losses would be greater than the entire market capitalization of the firm.

Alarmed by the findings of the model, Peter calls upon his supervisor Will Emerson to check the numbers. An emergency meeting is called up in the middle of the night where all the members of the senior executive committee are present including the CEO of the bank, John Tuld.

Running through the numbers and finding no other optimal way, John orders for an immediate sale of all the toxic financial assets firm holds, before the market could react.

The decision taken by Tuld is demurred by many top executives since they knew that it would destroy the firm’s relationship with all its customers and cause a major blow to the entire financial system. The value of the product they were selling to their customers in the name of MBS was plunging, just as the real estate market in the USA back in 2008.

Initially reluctant, Sam agrees to the sale of the toxic assets in exchange for huge compensation from Tuld. Sam orders all the traders on his floor to unwind their positions in the toxic asset purely in cash deals and offered them huge bonuses and commissions once they achieve a set target. Information about the company’s misdemeanor is spilled out and the traders are forced to sell at significant discounts.

Once the target sale is achieved and all assets are cleared, another round of laying off starts and most of the employees are let go with hefty compensations and bonuses. Sarah Robertson, the chief of risk management, is used as a scapegoat and also dismissed from her duties. Dismayed, Sam reaches out to Tuld to explain to him about his longing to leave the firm. Tuld reminds him how the current crisis is no different from the previous crises and how the proportion of winners and losers always remains the same. Entwined between the dubious system and the need for financial resources, Sam decides to continue with the firm for another 2 years in anticipation of earning more money.

Relevance to the SimTrade course

The concepts shown in the movie correlates to the concepts of ‘Demand & Supply’ and ‘Financial Leverage’ taught in the SimTrade course. During the first decade of the 21^st century, low-interest rates prevailed in the US economy giving rise to debt-financed consumption. The easy availability of sub-prime housing loans lured people from the lower strata of the society to avail the benefits of it. Subsequently, the increase in loan availability raised the demand for customized securities which came in the form of MBS, which became a trending asset in the market. The financial bubble kept on building up as the intrinsic value of MBS started dwindling. The falling asset value affected the investment bank as their business model was built on high exposure to these assets.

Also, this high exposure to subprime mortgages and toxic assets subsequently led to high level of leverages at the firm and statistical models of VaR (Value at Risk) and historical volatility failed to show a potential downside which could result in losses greater than the entire value of the firm. The risk models used by the firm considered the positions of other firms in the same assets and were not effective enough to take into account the risk magnitude of black swan events such as the default rates on subprime mortgages, the root cause behind the financial crisis of 2008. The financial damages and moral hazards associated with such an event are justified by the discount rates traders had to offer to unwind their position and also the client trust the firm lost as collateral damage. The movie shows the rationale of firms, referred to as too big to fail, in dealing with situations created as a by-product of their own actions.

Most famous quotes from the movie

“Sometimes in an acute situation such as this (referring to the sale of all toxic assets), often, what is right can take on multiple interpretations.” – Jared Cohen

“You know, the feeling that people experience when they stand on the edge like, this isn’t the fear of falling; it’s the fear that they might jump.” – Will Emerson

Trailer of the movie

▶ All posts about financial movies and documentaries

▶ Marie POFF Film analysis: The Big Short

▶ Marie POFF Film analysis: Too Big To Fail

▶ Shruti CHAND Financial leverage

Useful resources

SimTrade course Financial leverage

About the author

Article in October 2020 written by Akshit GUPTA (ESSEC Business School, Master in Management, 2019-2022).

Analysis of the Boiler Room movie

October 25, 2020 by Akshit GUPTA

Analysis of Boiler Room movie

This article written by Akshit Gupta (ESSEC Business School, Master in Management, 2022) analyzes Boiler Room movie.

Boiler Room (2000) is an American drama movie based on financial crimes that take place through various stock brokerage houses across the globe. As defined by U.S. Securities and Exchange Commission (SEC), “the name Boiler Room refers to large-scale operations designed to lure in as many investors to an investment scam as possible, often using high-pressure sales tactics. Boiler room scheme operators may cold-call investors or solicit investors through emails, text messages, social media, and other means.” The movie gives a very good perspective of how greed clouds the thought processing ability in many investors and gives rise to such schemes.

Summary of the movie

Boiler Room movie

The movie starts by introducing Seth Davis, a young college dropout from Queen’s College, who makes a handsome income by running an illegal casino in his home for college students. When his dad, Marty Davis, a federal judge, finds out about his son’s misdeed, he expresses his disappointment to him. In order to get things right with his father, Seth takes the job of a daytime broker at a stock brokerage firm named J.T. Marlin, situated on the expressway outside the New York City. The firm uses high-pressure telephonic sale tactics by cold calling people to convince them to invest their money. On the day of his interview, Seth is introduced to Jim Young, a co-founder at the firm. Jim explains the work Seth is expected to do and, recruits him as a stockbroker trainee. Seth starts making a good living from the firm and also wins his family’s support. Within 3 months of joining the firm, Seth clears his series 7 Exam and closes 40 new clients, becoming a well-recognized broker in the firm.

But, Seth senses the illicit nature of the business J.T. Marlin has been carrying out when he finds out the commission the brokerage firm has been earning is twice the legal limit as per SEC. When he asks his co-workers for the same, no one is able to provide him with a legitimate answer.

However, Seth continues to land new clients using his successful telephone tactics. He ends up with a new client named Harry Reynard, a purchasing manager working at a gourmet food company, and asks him to buy 100 shares at $8 per share of Farrow Tech, just to gain his trust. When the market starts plummeting, Seth convinces Harry to buy more shares as the company’s stock value is guaranteed to go up. Clouded by greed, Harry decides to invest his savings worth $50,000 in the company and ends up losing his entire wealth and his family.

Seth’s dad, Marty, finds out about the fraudulent business J.T. Marlin has been carrying out and how his son has been involved with a ‘chop-shop’ company. Showing his discontent, Marty disowns his son and asks him to never show up in front of him again. Driven by guilt, Seth decides to repay the money that Harry Reynard lost and also expose the scam done by J.T. Marlin. Seth loops in his father, Marty, to seek his help to invest in an IPO scheme the firm is looking for. Amidst fear of losing his judgeship, Marty decides to reconcile with his son by going for the IPO scheme. However, the FBI tapes all the telephonic conversation and arrests Seth under charges of violation of Section 26 of SEC and NASD regulations. Seth, in return for full immunity, decides to help the FBI by providing them with all the relevant key information about the firm.

Returning to the office, Seth convinces Michael Brantley, the founder of J.T. Marlin, to allot 10,000 shares of the new IPO to Harry Reynard by falsely portraying Harry as a very big client for the brokerage. He gets the sale ticket signed from Chris, a senior broker at the firm, to authorise Harry to sell the shares of the IPO in open market. Meanwhile, he also loads all the confidential data of the company in a floppy disk for the FBI. The movie ends with the FBI surrounding the office building of J.T. Marlin and Seth leaving the office with full immunity.

Relevance to the SimTrade course

The concepts shown in the movie blends with the practical learnings imparted on the SimTrade platform. J.T. Marlin, trading in chop-stocks, is a fraudulent company involved in pump and dump, a scheme where artificial demand is created to inflate prices for stocks of microcap and shell companies. Such companies claim to have sensitive information about the stock, unavailable in the public domain. When the stock prices rise substantially, these companies dump huge piles of stock in the market thereby crashing the stock prices and leaving investors bankrupt.

The movie aptly portrays the importance demand & supply play in the open market and how artificial demand can be created to generate high profits. Here, the concept of market news plays a key role in determining the authenticity of the hyped-up stock prices and investors should focus on them to take correct positions. Emotions such as fear, greed, and euphoria should be kept at bay while investing in the markets to take effective decisions.

Most famous quote from the movie

“And there is no such thing as a no sale call. A sale is made on every call you make. Either you sell the client some stock or he sells you a reason he can’t. Either way a sale is made, the only question is who’s gonna close? You or him.” – Jim Young

Trailer of the movie

About the author

Article written in October 2020 by Akshit GUPTA (ESSEC Business School, Master in Management, 2019-2022).

The bankruptcy of the Barings Bank (1996)

January 27, 2024October 25, 2020 by Akshit GUPTA

The bankruptcy of the Barings Bank (1996)

This article written by Akshit GUPTA (ESSEC Business School, Grande Ecole Program – Master in Management (MiM), 2022) analyzes the Big Short movie.

Founded in 1762 by a British born man named Francis Baring, Barings Bank was the second oldest merchant banks in the entire world with some of the most popular names on their client list. Baring futures was incorporated in Singapore in the year 1986 to trade in the futures market at SIMEX (Singapore International Monetary Exchange) under the parent company, Barings group. The arm trading in futures generated reasonable profits until 1992 when Nicolas William Leeson joined as the head derivative trader at the trading floor of the bank at SIMEX.

The bankruptcy

Barings Bank

Nick Leeson, as the new in-charge of derivatives trading at Baring Futures, was assigned to generate profits by arbitraging the price difference of Nikkei 225 future contracts between SIMEX and Japan Stock Exchange. He was also made to look after both the trading floor and the back office to enter and settle trades. A persistent worker, Nick started generating good returns by entering unauthorized trades on behalf of the bank. His trades were working well until a floor trader undertook a wrong trade and resulted in small losses to the bank. To cover the losses for the trader, Nick opens a new account numbered 88888 to hide those losses. But as the losses kept on accumulating, Nick started pursuing his unauthorized trading from the shell account to make up for the losses by doubling his bet. He also started holding on to his position for longer periods than he was permitted in order to generate higher profits. However, the audit system at the bank failed to investigate the accounts due to its inefficiency.

Nick was able to cover up for these losses until a major earthquake struck Japan in 1995 and his unhedged positions started pouring in millions of pounds of losses in the shell account. In order to cover for it, Nick started taking even bigger positions in the futures in the attempt of moving the markets in his favor.

However, the markets didn’t spring back to his side and Nick accumulated losses of more than 800 million pounds. Knowing his game was coming to an end, Nicholas Leeson fled to Germany in order to avoid judicial actions, but was caught at Frankfurt airport in March 1995 and sentenced to 6 years of jail in Singapore.

Nick Leeson

Lacking sufficient funds to cover for the settlement of the futures contracts, Barings Bank was liquidated on 26 February 1995. In March 1995, the Dutch banking group, ING, purchased Barings bank at a very nominal price resulting in the formation of ING Barings.

In order to prevent such debacles in the future, amendments were made in the Futures Trading Act on 1^st April 1995, giving the monetary authority of Singapore the right to oversee the activities at SIMEX more closely. The fall of Baring Bank is a traditional example of how a lack of proper compliance and checks can lead to catastrophic events that even the biggest of all can’t survive.

Relevance to the SimTrade course

The fall of the Barings Bank teaches us some important lessons that every trader and company should follow in order to prevent such events from happening again in the future. Nick Leeson used a martingale strategy in order to double his bets on the loss generating trades. The confidence of covering up for the losses clouded Nick’s judgment and resulted in even bigger losses for the bank. A good trader should never let fear or greed dictate his of her actions. The unhedged trades Nick entered produced catastrophic results when the entire market collapsed due to a natural calamity. The results of such actions were well seen by the increase in losses in the 88888 account. The excessive use of leverage, speculation, and unplanned trades led to the collapse of this mighty institution. The SimTrade courses teach us to execute trades in a well-planned form in order to handle any unfavorable circumstances. The use of different types of orders is very essential to cover open positions and protect against such events. The fall could have been controlled if stop-loss strategies would have been adopted by the trader. The incidence teaches us the very essence of not trying to fight the financial markets as they are always right.

About the author

Article written by Akshit GUPTA (ESSEC Business School, Grande Ecole Program – Master in Management (MiM), 2022)

Analysis of The Wolf of Wall Street movie

October 17, 2020 by Akshit GUPTA

Analysis of The Wolf of Wall Street movie

This article written by Akshit GUPTA (ESSEC Business School, Grande Ecole Program – Master in Management, 2019-2022) analyzes The Wolf of Wall Street movie.

The Wolf of the Wall Street (2013) is an American drama movie based on true events showcasing the life of an infamous stockbroker and trader, Jordan Belfort. The movie shows how Stratton Oakmont, the firm founded by Jordan and his friends, was involved in a series of large scale corruption and scams that managed to dupe people into investing their hard-earned money in penny stocks. On the marketing side, the use of high-pressure telephonic tactics and scripted talks has been shown as an effective measure to lure people into these scams.

Key characters in the Movie

Jordan Belfort: Founder of Stratton Oakmont
Donnie Azoff: Co-founder of Stratton Oakmont
Naomi Lapaglia: Wife of Jordan Belfort
Aunt Emma: Aunt of Naomi residing in England
Patrick Denham: FBI agent
Jean-Jacques Saurel: Swiss Banker

Summary of the movie

The Wolf of Wall Street movie

The movie starts by introducing Jordan Belfort, a 22-year-old stockbroker, who has joined an investment bank named L.F. Rothschild, based out in Wall Street. He learns the art of generating high commissions, through his aggressive stock pitching, very quickly while working under Mark Hanna, a senior stockbroker at the firm. The unfortunate Black Monday of October 19, 1987 occurs, resulting in termination of Jordan’s job at the bank.

To move forward with his career, Jordan joins a Boiler Room stock brokerage firm in the Long Island, named Investors Center. The firm deals in unlisted penny stocks and pink sheets while engaging in illicit businesses with high commissions up to 50% of the traded value. In his initial task, Jordan is made to pitch the stock of a company named Aerotyne, a pink sheet stock of a company based out in a small garage. Jordan is lured by the amount of potential this business carries. Using his impressive sale tactics, he makes a good fortune while working at the firm.

While eating at a restaurant, Jordan meets Donnie Azoff, his neighbor, and both of them become friends instantly. They decide to open up a brokerage firm, named Stratton Oakmont, and recruit Jordan’s friends as the senior brokers at the company. Their business model relies on luring the top 1% population of America and gaining their confidence by pitching blue-chip stocks initially. As the investors becomes loyal to the firm, Jordan and his friends would sell them unlisted penny stocks, on which the company would earn high commissions. The simple pump and dump deal made Jordan a millionaire within a short span of time. As the company grew, the founders started living a lavish life spending on drugs and other illegal needs and also recruited more employees to expand their operations. The company became a big name on the Wall Street with the Forbes magazine publishing an article about them. The excessive limelight brought the firm under the radar of the FBI and SEC starting to investigate the operations of the firm. Jordan brings in his father to oversee the bank accounts for his firm. To remain safe from any issues, Jordan also hires a legal advisor to keep a check on the legal formalities.

After finding out about his extramarital affair with Naomi Lapaglia, Jordan’s wife divorces him and soon he marries Naomi in a fancy wedding. To gain more popularity, the company decides to launch the IPO of then-famous brand Steve Madden. Jordan and Donnie together hold around 50% of the listed stocks of Steve Maddens and when the stock becomes a success they make profits of more than $20 million within a day. The IPO makes the FBI more suspicious about the firm and they start their investigation on the same.

To keep his illicit money safe from all the authorities, Jordan decides to store it in offshore accounts in Switzerland and takes a trip for the same. Together with his friends, Jordan meets a group of bankers led by Jean-Jacques Saurel and decides to open up an account in the name of Naomi’s aunt, Emma, who is a European passport holder. The smuggling of cash takes place over the next few weeks and is deposited in the offshore accounts.

Jordan’s private investigator informs him about his phone being tapped by FBI agents to gather proof against him. Cautious about his moves, Jordan initially decides to step down from his company but later changes his mind, when requested by his colleagues.

Jordan takes a trip to Italy with his wife and Donnie’s family and operates his business from there. But soon, the news of Aunt Emma’s demise arrives and Jordan decides to go to Switzerland via Monaco, on a yacht to safeguard his money. The yacht is knocked over by a sea storm and the group barely escapes the incident.

Taking it as a signal of God, Jordan decides to sober up his life and changes his lifestyle. Two years after the incident, Jean Jacques Saurel is arrested in Switzerland in some cases unrelated to Jordan but he confesses about Jordan’s illicit business and accounts. As fate had its own plans, Jordan is arrested with overwhelming proofs. Jordan’s lawyer tries to cut a deal with the FBI and in return, Jordan is asked to turn upon his other friends involved in the scam. He agrees and his prison sentence is reduced to 36 months, completing which he turns into a public speaker and talks about his effective sales tactics.

Relevance to the SimTrade course

The lessons taught in the movie perfectly blends with the concepts that are taught on the SimTrade course. The movie depicts the effective use of concepts such as “Demand & Supply” and ‘Market Manipulation’ to generate high profits. The technique used by Jordan involves creating a need for a product in the market and building trust with his clients to sell that product. The high-pressure sale tactics were at the core of this fraud which involved duping thousands of investors and creating an urgent demand for products that had the so-called potential to earn fortunes.

The financial frauds shown in the movie include “pump and dump” schemes which were very prevalent in the financial markets until a few years back. The scheme involves inflating the prices of penny stocks or pink sheet stocks to high levels and then selling them at those prices to crash the market and make huge profits. The brokers were involved in creating artificial demand for the stocks, that were otherwise worthless, and hampering the free and fair operations of the market, thereby manipulating it. The alertness and effectiveness of market regulators and agencies are what helped stop such schemes to operate openly in the markets and safeguard investor’s interest. Instead of working towards generating high commissions and fulfilling their ambitions, stockbrokers should engage themselves in building trust with their clients by keeping their interests in mind.

Most famous quotes from the movie

Please find below some quotes from the movie that may help you to progress in your professional career:

“The only thing standing between you and your goal is the bullshit story you keep telling yourself as to why you can’t achieve it.” – Jordan Belfort

“97% of the people who quit too soon are employed by the 3% who didn’t.” – Jordan Belfort

Trailer of the movie

About the author

Article written by Akshit GUPTA (ESSEC Business School, Grande Ecole Program – Master in Management, 2019-2022).

Analysis of the Big Short movie

January 2, 2024September 23, 2020 by Akshit GUPTA

Analysis of The Big Short movie

This article written by Akshit Gupta (ESSEC Business School, Grande Ecole Program – Master in Management, 2019-2022) analyzes The Big Short movie.

The Big Short (2015) is an American financial drama film based on the famous book “The Big Short: Inside the Doomsday Machine by Michael Lewis” portraying how few financial industry professionals predicted the buildup of the real estate bubble before the crisis of 2008. It shows how professionals working at large hedge funds and investment banks made fortunes after the collapse of the housing bubble. The movie gives a very good insight into the functioning of the biggest investment banks and events that led to a huge financial crisis in 2008 affecting the entire world economy and leaving millions of people homeless.

Key characters in the movie

Michael Burry, Hedge fund manager at Scion Capital
Jared Vennett, Executive at Deutsche Bank
Mark Baum, Hedge fund Manager at FrontPoint Partners
Charlie Geller & Jamie Shipley, Founders at Brownfield Capital
Ben Rickert, a retired trader

Summary of the movie

The Big Short movie

The movie starts by introducing Lewis Ranieri, an executive working at Solomon Brother, a person responsible for the popularisation of Mortgage-Backed Securities (MBS) in the late 1970s. The demand for these MBS spread like wildfire with every investor running to own a couple of them. The investment banks started buying several home mortgages from commercial banks and packaged them into single bond-like security which came to be known as Mortgage-Backed Securities. The demand for these securities soared and commercial banks started issuing fresh subprime level mortgages to fulfill the demand for these products. During 2005, a hedge fund manager named Dr. Michael Burry, working at Scion Capital studies the mortgages that are been bundled into these securities to check upon their credibility. As per his findings, a housing bubble was being formed and the adjustable-rate mortgages that have been used to build these securities would eventually start defaulting. He sensed an underlying crisis in the second quarter of 2007 as the interest rates were supposed to rise by then which would affect the adjustable-rate mortgage payments.

He sees a great opportunity in short selling these instruments to make huge profits for the fund. He buys credit default swaps against these securities from different investment banks with a cumulative position of $1.3 billion. The structure of these swaps was set as pay-as-you-go which meant Dr. Burry had to pay regular premiums as the value for these bonds moved in an unfavorable direction. The premiums amounted to around $80 million each year, which upsets many of his large investors, who start demanding the withdrawal of their investments.

Jared Vennett, a salesman at Deutsche Bank, gets to know about Dr. Burry’s deal with large banks from one of his colleagues and starts to look into the real estate market eyeing a huge commission on the sale of these swaps. In the next scene Mark Baum, a lead fund manager at FrontPoint Partners, is introduced, who thinks the entire system is full of fraudulent people and low business ethics. Jared Vennett wrongly calls Mark Baum’s office, but they eventually end up meeting for a discussion over the credit default swaps that Dr. Burry has bought. Vnnett explains the concept of Collateralised Debt Obligations (CDO) to Mark and tells him about the AAA rating these bonds have despite their high-risk exposure. Seeing an opportunity, Mark, along with his team, starts their investigation into the real estate industry and visits several residential sites to know about the mortgage default risks. As per their finding, a bubble was being built up and they decide to buy credit default swaps from Vennett.

The third scene introduced Charlie Geller & Jamie Shipley, Founders at Brownfield Capital, who finds a copy of a presentation about credit default swaps by Jared Vennett at the reception of JPMorgan Chase. They become increasingly interested in this opportunity and call their friend Ben Rickert, a former trader at Deutsche Bank, to help them with buying these swaps.

In early 2007, the mortgage default rates started rising significantly but the ratings on these bonds remain unchanged and their value rises. Confused by the market movements, Mark Baum visits an acquaintance working at Standard & Poor’s to enquire about the unchanged ratings. He discovers the conflict of interest existing in these rating agencies and gets frustrated at the same.

Mark is introduced to Mr. Chau, a business, who has created synthetic CDOs, a structured product used to double the bets on the housing markets. Mark senses the downfall of the entire US economy and increases his short position the bonds by buying more credit default swaps.

Charlie Geller & Jamie Shipley plan to buy credit default swaps against AA rated securities, which are considered to be the safest investments, and get offers with really low premiums and high payouts. Ben grows increasingly concerned about the impending fall of the US economy and lashes out at Charlie for placing a bet against the entire financial sector of the economy.

During 2008, the market finally starts coming down with big banks defaulting on their payments and going bankrupt. All the professional holding credit default swaps make fortunes out of the market but none of them seems to be happy about the current health of the financial system and the immoral business practices followed within it. As predicted by Mark Baum, big banks are rescued using public bailouts and the entire blame is put upon the suffering lower strata of the society including immigrants, poor people, and teachers.

Relevance to the SimTrade course

The concepts shown in the movie perfectly correlates to the learnings taken from the SimTrade course. The imbalance between the ‘Demand & Supply’ function is what led to the creation of this big housing bubble wherein the banks issued sub-prime category loans to fulfill the increasing need for mortgage-backed securities. To have an efficient financial system, a proper balance and check are required for the smooth functioning.

The concept of ‘Short Selling’ is depicted in the movie which correlates to Period 3 of the SimTrade course. The bankers short MBS using credit default swaps to benefit from the negative movement in market prices of the bonds. Short selling is a famous trading strategy used to benefit from the predicted fall in the market prices of securities and is widely used across derivatives and equity stock markets. It is necessary to bring liquidity to the market.

Also, the movie shows complex structured financial products like collateralized debt obligations, synthetic CDOs, and credit default swaps which play a pivotal role in driving the revenues for big investment banks. These structured products are very well explained in the movie using small cameo appearances by guest speakers. The demand for these products led banks to have high financial leverages which later proved to be a bane for them. An effective risk management system is required to sustain such complex products and the dearth of these led to the collapse of some biggest investment banks. The lack of business ethics and excessive greed are also well represented in the movie where the bankers resort to creating more complex securities which come tumbling down like a domino effect when the foundation of these instruments, mortgages default.

A famous quote from the movie

“While the whole world was having a big old party, a few outsiders and weirdos saw the giant lie at the heart of the economy, and they saw it by doing something the rest of the people never thought to do: They looked.” Jared Vennett

Financial terminology

Mortgage-Backed Securities (MBS)- These are asset-based securities that are secured by a collection of mortgages. The mortgages held by commercial banks are sold to investors, which are mostly institutions, who combine them into MBS which can be further sold to individual investors. The MBS can be mainly divided into two types namely pass-through certificates and collateral debt obligations.
Collateral Debt Obligations (CDO)- Mortgages belonging to different risk categories, also called tranches, are combined into bundles based on their credit ratings, time to maturity, and payment terms. These securities have quite complex structures, making it difficult to regulate them.
Synthetic CDO- A modern form of traditional collateralized debt obligations, a synthetic CDO is based on non-cash income-generating assets that propose high yields, rather than bonds, mortgages, etc. These synthetic securities are based on instruments such as credit default swaps and their values are derived from the premiums paid on such swaps.

Trailer for the movie

All posts about movies and documentaries

▶ Marie POFF Film analysis: The Big Short

▶ Marie POFF Film analysis: Too Big To Fail

▶ Sruti CHAND Financial leverage

Useful resources

SimTrade course Financial leverage

About the author

Article written in September 2020 by Akshit GUPTA (ESSEC Business School, Grande Ecole Program – Master in Management, 2019-2022).

Portrait of George Soros: a famous investor

August 25, 2020 by Akshit GUPTA

Portrait of George Soros: a famous investor

This article written by Akshit GUPTA (ESSEC Business School, Grande Ecole Program – Master in Management, 2019-2022) presents a portrait of George Soros: a famous investor who broke the Bank of England in 1992.

“I’m only rich because I know when I’m wrong.” – George Soros

Pondering upon the above quote makes me realize that successful people do make bad choices but what matters is the fact that how long you take to correct that choice.

George Soros

Introduction

George Soros or ‘Boogeyman’, as quoted in an article by the New York Times, is a leading and one of the most successful investors and trader of all time. Born on August 12, 1930 in Budapest, Mr. Soros is not only a successful trader but also a business magnate, philanthropist and an assertive author who owns a hedge fund named Soros Fund Management, registered in New York City, United States, which reported an earnings of $300 million in 2016 and is ranked amongst the Top 10 Global Hedge Funds in the Forbes list.

Apart from being well known for this trading style, Mr. Soros is also known as a person who broke the Bank of England on September 16, 1992, the day which is registered as a ‘Black Wednesday’ in the history of Britain.

Black Wednesday

In 1979, a European Exchange Rate Mechanism (ERM) was set up to reduce exchange rate variability and stabilize the monetary policies across the continent. Also, a stage was being set to introduce a unified common currency named Euro. Britain joined ERM in the late 1990s due to political instability in the country raising fears of higher currency fluctuations. Under this mechanism, a bar of 6% fluctuation in either direction was set up giving the central banks of European countries like the Bank of England the right to intervene in the currency market with counter trades during adverse situations.

The Pound Sterling shadowed the German mark but owing to challenges faced by Britain at that point in time, including lower interest rates, higher inflation rates and an unstable economy, the currency traders weren’t satisfied with the decision. In order to protect their position, the traders started shorting Pound Sterling and amongst one of the lead traders was Mr. Soros who took a short position in Pound Sterling amounting to $10 billion. Owing to such a mass sell-off for Pound Sterling, the British Government was forced to withdraw from the ERM system and following this decision, the country went into official recession. During this entire period, George Soros made a whopping $1 billion with his position and brought Bank of England on its knees.

Relevance to the SimTrade course

The SimTrade course teaches us the relevance of market news, types of orders and value creation while executing trades in the financial markets. The experiences of Soros correlate with the concept of value creation and teach us a great deal about how a successful trader is not only a person who makes profits but also a person who knows how to cut upon the losses. It is always necessary to have a flexible approach towards the trades one has executed and, adapt with time. This relates to the risk management of a trading position.

George Soros is also a firm believer and propagator of the philosophy of ‘reflexivity’. Reflexivity relates to a feedback loop between the financial markets and the real economy. The fundamentals of the firms have an impact on financial markets, and reciprocally, financial markets have an impact on the firms.

About the author

Article written in December 2022 by Akshit GUPTA (ESSEC Business School, Grande Ecole Program – Master in Management, 2019-2022).

Analyse du film « Money Monster »

June 30, 2020 by Mohamed Dhia KHAIROUNI

Analyse du film « Money Monster »

Cet article écrit par Mohamed Dhia KHAIROUNI (ESSEC Business School, Grande Ecole – Master in Management, 2019-2022) analyse le film « Money Monster ».

Money Monster est un film américain réalisé par Jodie Foster en 2016.

Résumé

La majeure partie de Money Monster se déroule en huis-clos sur le plateau de tournage de l’émission éponyme présentée par Lee Gates (George Clooney), présentateur de télé vedette suivi pour ses conseils avisés en matière de boursicotage.

Le programme diffuse pernicieusement l’idée selon laquelle placer son argent en bourse et jouer avec les marchés pour s’enrichir est aussi banal que de se faire livrer une pizza.

Un beau jour, en plein direct de l’émission, Lee Gates se retrouve pris en otage par un homme ayant perdu toutes ses économies après avoir appliqué ses recommandations de placements. La réalisatrice de l’émission, Patty Fenn (Julia Roberts), choisit de conserver l’antenne comme le lui incombe le jeune homme armé. Débute alors une sorte de téléréalité-réquisitoire populaire contre le capitalisme, menée tambour battant par le preneur d’otage. Protestation qui se mue peu à peu en enquête de fond en direct, permettant ainsi à des millions de téléspectateurs de comprendre comment la société Ibis Clear Capital a pu faire perdre 800 millions de dollars à ses petits actionnaires.

Lien avec le cours Gestion financière

Le film “Money Monster” nous rappelle les concepts de la bourse vus en cours. La valeur de l’action de Ibis Clear Capital a chuté, ce qui explique la prise en otage de Lee Gates par Kyle qui semble ne pas comprendre les mécanismes régissant la bourse. Gates, à un moment, fait appel aux gens regardant son émission à acheter les actions de cette entreprise afin de relever le prix. Cette scène nous met en évidence l’influence de l’offre et la demande dans la bourse.

Lien avec les métiers de la finance

Ibis Clear Capital est un fonds d’investissement.

Gestionnaire de fonds

Fonds d’investissement : Un fonds d’investissement est une société publique ou privée qui investit du capital dans des projets d’entreprises correspondant à ses spécialités. Les fonds d’investissement peuvent faire partie de banques, d’organismes de financement, mais aussi appartenir à des personnes individuelles. Ils sont souvent spécialisés dans un secteur. Les capitaux peuvent être versés au démarrage de la vie de l’entreprise : il s’agit alors de capital risque. Si la société fait appel au fonds d’investissement pour financer son développement, l’activité de financement est appelée capital-développement.

Bande-annonce du film « Money monster »

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A propos de l’auteur

Article écrit en juin 2020 par Mohamed Dhia KHAIROUNI (ESSEC Business School, Grande Ecole – Master in Management, 2019-2022).

Analyse du film « Le Grand Retournement »

June 28, 2020 by Mohamed Dhia KHAIROUNI

Analyse du film « Le Grand Retournement »

Cet article écrit par Mohamed Dhia KHAIROUNI (ESSEC Business School, Grande Ecole – Master in Management, 2019-2022) analyse le film « Le Grand Retournement ».

Le Grand Retournement est un film français réalisé par Gérard Mordillat en 2013.

Résumé

Le Grand Retournement est une comédie qui repeint la crise économique et financière de 2008. Les banques sont au bord de la faillite. Afin de sauver leurs mises, les banquiers font appel à l’Etat. Le film dresse un contexte où l’Etat est sauveur. C’est l’Etat “Providence” qui finit par payer les pertes et redonner le souffle aux banques. Le cadre du film annonçant la fin du monde et les dialogues subtils et captivants font de ce film une critique du monde de la finance. La cupidité, la convoitise et la bêtise humaine sont soulignées. Le film se conclut par des images de révolte du peuple, poussant le public à se poser des questions sur l’avenir de ce monde. C’est un long-métrage à voir étant donné qu’il combine finance et humour. Les critiques des intervenants financiers nous poussent à méditer. Quel sera l’avenir de la finance mondiale ?

Lien avec le cours Gestion financière

Le vocabulaire de la finance est omniprésent dans le film « Le Grand Retournement ». Les banquiers et les conseillers financiers font allusion à beaucoup de concepts financiers tels que les swaps, les credit default obligations (CDO), etc. En outre, dans ce film, la dette est un élément clé. C’est en lien avec ce qui a été vu en cours concernant les besoins de financement des entreprises. La trésorerie (la nécessité de « maîtriser sa trésorerie » comme dit dans le film) est aussi évoquée sans beaucoup de détails. Cela nous rappelle les tableaux de flux de trésorerie. Le film fait donc référence aux tableaux de flux et à comment les interpréter.

Lien avec les métiers de la finance

Trésorier

La Trésorerie est un concept largement évoqué dans cette comédie française. On détaille ici les métiers de gestion des flux de trésorerie. La gestion des flux de trésorerie regroupe toutes les stratégies mises en place pour analyser et exploiter les flux financiers d’une entreprise. L’évaluation du montant du cash entrant et sortant est décisive pour une gestion efficace au sein d’une trésorerie.

La gestion des flux de trésorerie définit avec précision la quantité de fonds disponibles à tout moment dans l’évolution d’un groupe, ceci afin d’estimer les pertes potentielles qui peuvent l’affecter. Ces changements de flux constituent la vie quotidienne de tout business, et la gestion du cash flow assure la sécurité financière de l’entreprise dans le temps.

La gestion de trésorerie (ou cash management) se situe un niveau au-dessus de la gestion de flux de trésorerie, et doit donc comprendre à la fois les dépenses et flux de trésorerie passés. Elle doit aussi permettre de prévoir les flux de trésorerie à venir afin d’adapter la stratégie de l’entreprise et de déterminer si des fonds sont disponibles pour investir.

Bande-annonce du film « Le Grand Retournement »

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A propos de l’auteur

Article écrit en juin 2020 par Mohamed Dhia KHAIROUNI (ESSEC Business School, Grande Ecole – Master in Management, 2019-2022).

Analyse du documentaire « Inside Job »

June 27, 2020 by Mohamed Dhia KHAIROUNI

Analyse du documentaire « Inside Job »

Cet article écrit par Mohamed Dhia KHAIROUNI (ESSEC Business School, Grande Ecole – Master in Management, 2019-2022) analyse le documentaire « Inside Job ».

Inside Job est un film documentaire américain produit, écrit et réalisé par Charles H. Ferguson sorti en 2010. Ce film a remporté l’Oscar du meilleur film documentaire en 2011.

Résumé

Inside Job est un documentaire très utile et enrichissant pour comprendre la crise qui a secoué le monde en 2007-2008. Ferguson était exhaustif dans ses recherches et avait recueilli les avis de plusieurs intervenants financiers (Nouriel Roubini, Christine Lagarde, etc.). On trouve aussi des personnes qui défendent les banques. Le film documentaire vise ainsi à identifier un large panel d’acteurs de la finance pour montrer que cette crise aurait pu être évitable en dévoilant les relations nocives qui avaient corrompu le monde politique, les autorités de régulation et même le monde universitaire (on trouve Glenn Hibbard, Doyen de la Columbia Business School qui a été corrompu pour sortir des garanties, faussant par conséquent la réalité économique et financière).

Lien avec le cours Gestion financière

Comme le film « The Big Short : La Casse du Siècle », Inside Job nous replonge dans la crise économique et financière de 2008. Le documentaire aborde la finance des marchés qu’on aborde dans le cours de gestion financière. Il met le point sur les actifs toxiques et l’opacité de financement des banques. S’agissant d’un documentaire, les preuves données permettent de mieux cerner le fonctionnement des grandes banques d’investissement (Lehman Brothers, Goldman Sachs …) ainsi que le rôle que ces banques ont joué dans la crise.

Lien avec les métiers de la finance

Ce documentaire traite principalement les banques d’investissement.

On détaille ci-dessous trois filières dans les banques d’investissement : Mergers and Acquisitions (M&A), Equity Capital Market (ECM) et Debt Capital Market (DCM).

Mergers and Acquisitions (M&A)

Le M&A : Mergers and Acquisitions, soit en français Fusions et Acquisitions. Les équipes de M&A sont chargées de conseiller leurs clients sur des opérations de fusions, d’acquisitions, ou de cessions. C’est un métier de conseil financier avec une forte dimension stratégique: le banquier en M&A est force de proposition sur les opérations de croissance externe de son client. Le banquier en fusions-acquisitions partagera son temps entre l’exécution des transactions pour lesquelles il détient un mandat et les propositions de nouvelles opportunités d’acquisitions (pitch) auprès de ses clients.

Equity Capital Market (ECM)

L’ECM : Equity Capital Market. Les équipes d’ECM sont chargées de conseiller leurs clients sur des opérations d’introduction en bourse ou d’augmentation de capital. C’est un métier de conseil financier lié au financement par émission d’actions. De manière logique ce métier est davantage lié au marché financier que celui de M&A, ce qui se traduit par moins de travaux de valorisation et davantage de travail d’analyse du marché et de marketing auprès des investisseurs.

Debt Capital Market (DCM)

Le DCM : Les équipes de Debt Capital Market, ou DCM, sont chargées de conseiller leurs clients sur des opérations d’émission de dette. C’est un métier de conseil financier lié au financement par émission d’obligations. Également lié au marché, ce métier requiert une veille constante du marché obligataire afin de déterminer pour son client le moment opportun pour une émission obligataire au meilleur taux

Bande-annonce du documentaire Inside job

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A propos de l’auteur

Article écrit en juin 2020 par Mohamed Dhia KHAIROUNI (ESSEC Business School, Grande Ecole – Master in Management, 2019-2022).

Analyse du film « Glengarry »

June 26, 2020 by Mohamed Dhia KHAIROUNI

Analyse du film « Glengarry »

Cet article écrit par Mohamed Dhia KHAIROUNI (ESSEC Business School, Grande Ecole Program – Master in Management, 2019-2022) analyse le film « Glengarry ».

Glengarry (Glengarry Glen Ross) est un film américain réalisé par James Foley sorti en 1992.

Résumé

Mitch & Murray, une importante société immobilière, connaît un tournant quand un cadre supérieur anonyme et insultant annonce aux salesmen des mesures radicales concernant une restructuration des effectifs. Les meilleurs vendeurs resteront et gagneront des cadeaux et les autres seront renvoyés. Ainsi, les quatre vendeurs essayent de tout faire afin de ne pas perdre leur travail. Cependant, les fiches leur permettant de cibler des clients facilement sont toutes vieilles. Ils ne réussiront pas à vendre une seule propriété. Le cadre supérieur (Blake) remet des fiches Glengarry à John Williamson, le superviseur des quatre vendeurs. Ces nouvelles fiches leurs permettront de gagner de nouveaux clients. Le lendemain matin, alors que tout le monde retourne au bureau, une surprise les attend : il y a eu un vol et les fiches Glengarry ont été dérobées. Un détective intervient pour résoudre le problème et trouver le coupable.

Lien avec le cours Gestion financière

Le film n’est pas technique et la finance est effacée. Foley montre la perception du monde des vendeurs. Il s’agit d’une critique du capitalisme moderne. Il décrit la pression exercée sur les commerciaux afin de réaliser des chiffres d’affaires exorbitants.

Lien avec les métiers de la finance

Salesman

Le salesman, également désigné comme « sales » ou sale », exerce en tant que technico-commercial dans les salles de marchés. Son rôle est de prospecter et d’entretenir un portefeuille de clients pour le compte d’une banque d’investissement. Le salesman analyse les fluctuations de marché et conseille ses interlocuteurs sur leurs stratégies financières.
A la différence du trader avec lequel il est souvent confondu, le salesman est en contact direct avec les clients de la banque d’investissement. Son profil de technico-commercial lui permet d’informer les prestataires issus de différents types d’entreprises (assurances, caisses de retraite, sociétés…) des transactions des titres financiers. Le salesman analyse les fluctuations du marché et a un rôle de conseiller auprès des clients qui souhaitent affiner leur stratégie boursière.

Une des fameuses citations du film est “It takes brass balls to sell real-estate” (voir l’extrait du film ci-dessous).

Bande-annonce du film Glengarry

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A propos de l’auteur

Article écrit en juin 2020 par Mohamed Dhia KHAIROUNI (ESSEC Business School, Grande Ecole Program – Master in Management, 2019-2022).

Analyse du film « La Banquière »

June 21, 2020 by Mohamed Dhia KHAIROUNI

Analyse du film « La Banquière »

Cet article écrit par Mohamed Dhia KHAIROUNI (ESSEC Business School, Grande Ecole Program – Master in Management, 2019-2022) analyse le film « La Banquière ».

Le film « La Banquière » est un film français réalisé par Francis Girod, sorti en 1980, inspiré de la vie de Marthe Hanau.

Résumé

Ce film raconte l’ascension d’une jeune femme, Emma Eckhert, fille d’un chapelier juif. Dans les années 20, entre les deux guerres mondiales et grâce à un réseau développé et une intelligence hors-norme, Emma parvient à prendre une place dans le cercle te fermé de la haute finance. Le banquier Vannister, réticent face à cette montée en puissance et les taux d’intérêt avantageux proposés par Eckhert, mène un combat contre “la banquière”. Entre le caractère de la femme présentée par Romy Schneider juive, homosexuelle et à qui tout réussit, et le boursicotage, ce film nous met dans un cadre historique très sensible qui précède la crise des années 1930. Vannister réussit grâce à ses connaissances à interdire les activités d’Emme Eckhert. En dépit de l’intelligence de cette dernière qui lui a permis de sortir de la prison, sa fin est tragique. Elle finit par être assassinée au cours d’un meeting où elle expliquait aux épargnants qui lui avaient fait confiance, comment elle allait les rembourser.

Film La Banquière

Lien avec le cours Gestion financière

Un des thèmes financiers traités dans ce film est les taux d’intérêt.

En effet, Emma Eckher propose des taux avantageux pour les épargnants de 8% face à un taux de 1,5% proposé par les concurrents. Elle avait fondé une feuille financière, La Gazette du franc, qui s’était rapidement imposée par la qualité de ses collaborateurs et par celle des personnalités du monde économique et politique dont elle publiait les interviews. Les conseils qu’elle prodiguait aux épargnants en matière de placements boursiers concernaient le plus souvent des actions et obligations de ses propres relations d’affaires. Le film évoque également la bataille qu’Eckhert a mené pour le franc, voulant que tout le monde tire profit du progrès général.

Lien avec les métiers de la finance

« La banquière » nous plonge dans les métiers de gestion d’actifs.

On traite plus précisément ici la banque de gestion d’actifs. Une banque de gestion d’actifs est un établissement financier spécialisé dans les services liés aux placements (SICAV, fonds communs de placement, assurance-vie, immobilier). Elle travaille aussi bien avec des particuliers, plus ou moins fortunés, qu’avec des clients institutionnels. Ses services sont assez proches de ceux proposés par les banques privées. Elle peut également interagir avec les clients d’une banque de détail pour collecter des fonds ou avec des banques d’investissement pour ses stratégies de couverture.

Bande-annonce du film Arbitrage

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A propos de l’auteur

Article écrit en juin 2020 par Mohamed Dhia KHAIROUNI (ESSEC Business School, Grande Ecole Program – Master in Management, 2019-2022).

Analyse du documentaire « L’Oracle »

June 19, 2020 by Mohamed Dhia KHAIROUNI

Analyse du documentaire « L’Oracle »

Cet article écrit par Mohamed Dhia KHAIROUNI (ESSEC Business School, Grande Ecole – Master in Management, 2022) analyse le documentaire « L’Oracle ».

Résumé

Martin Armstrong est dans le top des conseillers américains en investissement. Inspiré de la Grande Dépression et de ses nombreuses lectures, il avait développé un modèle informatique fondé sur le nombre Pi, et d’autres théories liées aux cycles capables de prédire des tournants décisifs de la vie économique mondiale. Il critique la politique et la finance actuelle (la dette souveraine, la corruption, etc.). Toutes les institutions voulaient obtenir ce code qui prévoit les tragédies financières. Cependant, il n’a pas cédé. Plus tard, le FBI a pris d’assaut ses bureaux, confisquant son modèle informatique, et l’accusant d’être à l’origine d’une arnaque à la Ponzi. Armstrong prévoit qu’une crise des dettes souveraines va éclater dans le monde entier au 1er octobre 2015, une date qui constitue l’un de ces tournants décisifs, liés au nombre pi, que son modèle a déjà prévu de longue date.

Lien avec le cours Gestion financière

La dette est au cœur de ce documentaire. Comme vu dans la séance 9, les caractéristiques des emprunts à moyen long terme sont mis en évidence dans ce film. Le profil de remboursement des dettes est obscur. Martin Armstrong traite en particulier les dettes souveraines, cependant des concepts déjà étudiés pour une entreprise peuvent être reportés pour mieux cerner l’enjeu du documentaire.

Concepts clés du film

Le film évoque un système Ponzi. La Pyramide de Ponzi, est la première arnaque célèbre utilisant le système de la pyramide pour flouer les investisseurs. Elle a été mise en place par Charles Ponzi à Boston en 1920. Le système est simple, Ponzi proposait à ses investisseurs des rendements mirobolants de 50% en 45 jours. Comme il est impossible de réellement produire ces rendements, Ponzi utilisait les fonds des nouveaux investisseurs pour servir le taux d’intérêt promis aux anciens investisseurs. Le système fonctionne tant que la pyramide grandit et qu’il y a suffisamment de nouveaux investisseurs pour financer les anciens investisseurs. A défaut la Pyramide s’écroule, le système explose, et tous les derniers investisseurs perdent la totalité de ce qu’ils ont investi.
C’est ce système qui a été utilisé par Bernard Madoff, à l’origine du scandale du fonds Madoff, qui a fait perdre près de 50 milliards de dollars à ses investisseurs quand le système a explosé en décembre 2008.

Lien avec les métiers de la finance

Le documentaire met en avant le métier de conseiller en investissements financiers (CIF) ou plus généralement le conseiller en gestion de patrimoine (CGP). Que fait un CGP ? Il examine la situation financière de son client et fait un bilan de sa structure patrimoniale (son actif et son passif). Il détermine ensuite avec le client ses objectifs (constitution d’une épargne, défiscalisation, …) en fonction de ses besoins (régime matrimonial, succession, …). Il définit une étude patrimoniale, suggère les cadres fiscaux, juridiques, ainsi que les produits adaptés (assurance vie, portefeuille boursier, …). Il définit une stratégie financière (achat de titres, assurance vie, immobilier, …) et dirige si besoin le client vers un gérant de portefeuille, un avocat, ou un notaire. Il définit ou contrôle les rapports de rentabilité des produits financiers contractés, les documents justificatifs de placement, et les transmet à son client.

Bande-annonce du documentaire « L’Oracle »

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A propos de l’auteur

Article écrit en juin 2020 par Mohamed Dhia KHAIROUNI (ESSEC Business School, Grande Ecole – Master in Management, 2019-2022).

Analyse du film « Arbitrage »

June 17, 2020 by Mohamed Dhia KHAIROUNI

Analyse du film « Arbitrage »

Cet article écrit par Mohamed Dhia KHAIROUNI (ESSEC Business School, Grande Ecole – Master in Management, 2019-2022) analyse le film « Arbitrage ».

Arbitrage est un thriller américain écrit et réalisé par Nicholas Jarecki, sorti en 2012.

Résumé

Robert Miller est un self made man des plus ordinaires. Magnat de la finance, il possède absolument tout. De l’argent, une femme, deux adorables enfants et même une maitresse qu’il s’octroie le droit d’aller chatouiller lorsque madame dort. Une vie banale pour un destin tracé depuis longtemps. Seulement voilà, ce train-train quotidien se trouvera bouleversé le jour où pris de fatigue (et oui une telle vie fatiguerait le plus vaillant des hommes !) il provoque involontairement la mort de sa compagne de l’ombre lors d’un accident de voiture. A peine perturbé par ce drame, il prend ses jambes à son cou, inquiété qu’il est de voir sa petite vie chamboulée d’un claquement de doigt. Commencera une longue et fastidieuse traque entre lui et un policier d’une perspicacité à toute épreuve, le simplet de la bande sans doute.

Film Arbitrage

Lien avec le cours Gestion financière

Le film n’est pas très technique et la vie personnelle du héros domine. Cela dit, l’aspect financier reste omniprésent. Miller gère un fonds d’arbitrage (hedge fund) et il est sur le point de vendre afin d’en tirer un bon bénéfice.
Voici des informations utiles sur ces fonds dits de “gestion alternative” : La gestion alternative vise à décorréler les performances du portefeuille de l’évolution générale de la bourse en intervenant sur les marchés des actions mais aussi sur les obligations, les devises, les matières premières, l’immobilier et les entreprises non cotées, le marché des œuvres d’art… Le but est généralement de lisser les courbes de rendement et de les améliorer par rapport au rendement du marché permettant d’avoir un meilleur rapport performance / volatilité. La raison pour laquelle ces « fonds alternatifs » sont considérés comme risqués est liée au fait qu’au-delà du « lissage » des courbes de rendement, ils ont servi lors de nombreuses attaques spéculatives, sur les taux de change par exemple, avec des retombées économiques néfastes pour le pays attaqué.

Lien avec les métiers de la finance

L’acheteur des fonds d’arbitrage recourt à un cabinet d’audit. Qu’il soit externe ou interne à l’entreprise, l’auditeur financier a pour mission de contrôler et vérifier la légalité des comptes d’une entreprise, la fiabilité des informations financières communiquées, des procédures de gestion et la sincérité des comptes.

Ses principales missions consistent à :

Vérifier les opérations financières d’une entreprise
Vérifier les opérations comptables d’une entreprise
Assumer l’audit de la gestion financière
Assurer le bon fonctionnement des procédures budgétaires et comptables d’une entreprise
Enquêter et réaliser des contrôles
Faire des propositions pour améliorer l’organisation du système financier
Informer et rassurer les investisseurs

Bande-annonce du documentaire Arbitrage

Comment voir le film

Netflix

Ressources

Zola E. (1891) L’argent.

SimTrade course L’effet de levier

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A propos de l’auteur

Article écrit en juin 2020 par Mohamed Dhia KHAIROUNI (ESSEC Business School, Grande Ecole – Master in Management, 2019-2022).

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