Brainteaser

Question: A hallway has 100 light bulbs numbered 1 to 100 with 100 corresponding light switches. 100 people walk through the hallway. The first person switches on every light bulb. The second person flips the switch of every second light bulb. The third person flips the switch of every third light bulb. The fourth person, every fourth and so forth until all 100 people pass through the hallway. How many light bulbs are switched on at the end?

Brainteaser

Answer: 10 light bulbs

Players of the DealSeptember 23, 2014

Pitch of the Week

• Ebay Pitch

Portfolio Applications Extended

• New deadline: This Thursday at midnight (9/25/14)

• Application link: http://bit.ly/1rZVDFY

Players of the Deal

• Corporate Finance• Investment Bankers• Sales & Traders• Hedge Funds & Asset Managers• Research

Corporate Finance

Main duties:• Managing and allocating

capital– Short term cash

management– Long term investments and

projects

• Financial reporting– Public company reporting– Internal auditing

• In-house M&A and valuation

Financial Planning & Analysis

Treasury

Cash Management

Corporate Development

Finance Departments

Investment Bankers

• Industrials • Consumer & Retail• Tech, Media, Telecomm

(TMT)• Real Estate• Financial Institutions (FIG)• Healthcare• Energy & Power

• Mergers & Acquisitions • Restructuring• Leveraged Finance• Capital Markets

– Debt Capital Markets (DCM)– Equity Capital Markets (ECM)

Types of Investment Bankers

Coverage Product

Investment Bankers

• Advisory:– Give advice on how to best structure the deal– Help companies through the different processes of

deals• Road shows, regulatory requirements, etc.

• Valuation:– Use to help gauge the price of a company– Third-party fairness valuations of companies

• Underwriting:– Help companies raise capital by first taking it onto the

bank’s balance sheet before selling to institutional investors

So what do they do?

Sales & Traders

• Clients• Sales• Traders• Structurers• Research Analysts • Risk Management

Players in the Secondary Market

Investor

Investment Bank

Corporation

$$$

$$$

Sales & Traders

• Now that the investor has the bonds what does he do?

• What else can you trade? Bonds, CDS, Futures, Options, Interest Rates, FX & Forwards

The secondary market provides liquidity

Investor

Investment Bank

1.Buy more bonds

2.Sell bonds 3.Swap bonds

for other bonds

Sales & Traders

Investment Bank

FICC Trading

G7

Interest Rates FX & Forwards

Emerging Markets

Interest Rates FX & Forwards

SPG Trading

MBS (Agency & Non Agency) ABS CDO’s

Equities

Cash Trading Derivatives

Credit

Investment Grade High Yield

Product Structure

Sales & Traders

• Client-facing business:– You are the competitive edge that differentiates

you from your competitors– This means getting the best price for your existing

clients, and winning business from competitors– It is your job to satisfy your firm’s clients, this

includes: • Road shows, dinners, conferences, golfing & sports

• Assisting the Traders:– Help traders get out of “Axed” positions– Help facilitate flow when markets are stable

Salespeople: So what do they do?

Sales & Traders

• Business of Risk Management:– Take a position on behalf of the firm to facilitate

client flow– Job is to make money off of bid/ask spreads – Building up inventory and getting lucky is not a

successful tactic in this business

• Qualities of Traders:– Analytical, quick, high risk appetite – Deep insight into the markets they trade; know

who your clients are, what they’re buying, and what they’re selling.

Traders: So what do they do?

Sales & Traders

• Structurers:– Client business that requires intense problem solving– Tailor make a solution for a specific problem

• Risk Management:– Stress-test across different parameters to make sure

the firm never breaches its risk limits

• Research:– Produce sell-side reports that explain changes in the

markets – Usually split by product and can require econometrics,

valuation analysis, or statistical and mathematical modeling

Front Office – other roles

Hedge Funds & Asset Managers

• Various types of Hedge Funds– Multi-Strat– Long-Short– Managed Futures– Merger Arbitrage

A Roadshow

Investment Banker

IPO Companye.g. Alibaba

Hedge Fund / Asset Manager Private Equity

Venture Capital

Why do you need them?

• Money• Pricing• Marketing – (Imagine if Buffett invested in your

company)

Research

• Sell-Side Analyst• Cover a specific sector / industry• Create financial models and research

reports• Interact with corporate executives• Introduce buy-side analysts to

corporate executives