CAPITAL
CASINOS
Stalker
LAURA HAJEK
IES17206
INTRODUCTION
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Money
Assets
Debt
Bonds and Shares
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Money Markets
Capital Markets
Future and Forward Markets
Cash or spot markets
Take a look at general financial techniques
Explore how financial institutions generate more profits
How they deal with risk and
What can make the trade floor appear like a casino
CAPITAL CASINOS
LAURA HAJEK
CONCEPTS
Equity
Bonds
Derivatives
CAPITAL CASINOS
Hedge
Funds
Sovereign
Wealth
Funds
LAURA HAJEK
BUYING INTO BUSINESS
Buyer
Seller
• Assessing future
profits of the business
• Has legal obligations
against the company
• Deals with risks
• Raise funds for
expansion
• Means to disclosure
details about
operations
• Injection of of capital
but loss of control
• Use capital to buy
competitors
CAPITAL CASINOS
LAURA HAJEK
EQUITY OPTION - SHARES
SETTING THE PRICE
GOING PUBLIC ON STOCK EXCHANGE
“Initial Public Offering”
“Dutch Auction”
• Setting the price of shares with help of an
investment bank
• Dispersing risk by forming an ad hoc
syndicate
• Generally open to everyone
• Often allocated to certain parties
• Ask potential buyers what they want to pay
• Highest bidders allocated all the shares
they asked for
• All shares are distributed from that down
• Example: Google
CAPITAL CASINOS
LAURA HAJEK
EQUITY OPTION - SHARES
SETTING THE PRICE
GOING PUBLIC ON STOCK EXCHANGE
• After shares are allocated the price
determines further development
• Trades to realize profits
• Based on future prognoses and
speculations
• Dividends for the shareholders
• Success depends on luck
CAPITAL CASINOS
LAURA HAJEK
PRIVATE EQUITY
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Emerge over the last years
Buy and try to improve companies
Sell for higher profit
Borrowed capital
Perform leveraged buyouts
High risk with high possible payoffs
CAPITAL CASINOS
LAURA HAJEK
BONDS
BOND =
A debt investment in which an investor loans money to an entity
(typically corporate or governmental) which borrows the funds for a
defined period of time at a variable or fixed interest rate
• Amount of money being
loaned
• Amount that gets payed
back when bond reaches
maturity
• = interest rate of the
bond
• The higher the interest
rate the higher the risk
• Issued for a
specifed period
of time
CAPITAL CASINOS
LAURA HAJEK
BUYING BONDS
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Companies issue bonds for big projects
Governments often use bonds to finance public projects  more safe
Issued on advice of an investment bank
No control over the company
Bought and sold on the bond market
Depend on changes in interest rates
Bond price
goes up
Interest rate
rises
Interest rate
drops
Bond price
goes down
CAPITAL CASINOS
LAURA HAJEK
TYPES OF BONDS
Junk Bonds
• Issued by less solid
companies
• By that offering higher
coupons
• Rating lower than B• Offered better yields than
merrited by the actual risk
Asset-Backed Bonds
Government Bonds
• In event of default owner of
the bond has a degree of
ownership
• Less profitable than equities
• Wide significance for the
financial crisis
• Safest bond
• Mainly used for public
projects
• Or pay for national debt
• In the event of earning more
from taxes government can
pay back debt or buy back
own bonds
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LAURA HAJEK
DERIVATIVES
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Contracts derived from shares and bonds or some other financial instrument
Much bigger element of betting
Work like insurance policies
Used wrongly they can be dangerous and cause financial chaos
Futures
Options
• Buffer against price
change
• Locking the transaction
to the current price
• Gives the right to sell
something at a specific
price
CAPITAL CASINOS
LAURA HAJEK
DERIVATIVES - SWAPS
Interest Rate Swap
Credit Default Swap
• Shifts the risk of the default of a bond to
an insurance seller for a certain
premium
• Sellers can be banks, insurance
companies and hedge funds
• Sold over the counter
• speculator tool:
• Making bids with higher risk
possible
• Getting excess to bonds
• Speculation on the quality of bonds
• Unregulated until 2009
• Exchange of one stream of future
interest payments for another based on
a specified principal amount
• Usually fixed for floating or vice versa
• each one agrees to pay each others
interest rates
• both parties usually know more about
each other than the market
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LAURA HAJEK
HEDGE FUNDS
• Private investment fund that markets itself exclusively to wealthy investors
• speculative trading with derivatives
• High-stakes speculation
• Aiming for high absolute returns
• Using leverage to maximize returns, using borrowed money
• Also make money in falling markets
 Shorting shares: rent shares, sell them at the current price and buy them back later at
lower price
• Betting on corporate failure
• Disastrous consequences for targeted companies
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LAURA HAJEK
SOVEREIGN WEALTH FUNDS
• Investment funds controlled by governments
• International investments beyond their own borders
• Mostly in banks and other funds
• Placing strategic assets and exert political influence
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LAURA HAJEK
CONCLUSIONS
• Diverse ways to realize profits
• Complex tools on financial markets
• Global external factors
• Risk as a main component and tool
• Finance can be a gamble
• Played wrong it can have huge impacts on the financial
market
CAPITAL CASINOS
LAURA HAJEK
THANK YOU
FOR YOUR ATTENTION