<<What kind of animal is this accumulator thing ? I read the AIG brochure, and I can't understand if this is a collection of mutual funds, and insurance policy, or a time share condo in Cancun>>
that, my friend bill, is the whole point. they were designed by the likes of gs, leh, ubs, cs, etc, and sold by all, including the retail banks, to folks with anywhere between usd 1 to usd billions
it is a counterparty hedge to be taken up by marks so that the i-banks can bet comfortably against them
typical product:
i sell you 10 mil face value of some accumulator
you pay 30% today
today i get 5% commission of 10 mil
today you get 20% 'interest' on 3 mil
in one years time, we decide by formulae, that you may get 0-7% 'interest' depending on (pick your poison per flavor of accumulator) (i) average price of this and that (i.e. hsbc of hk and dbs bank of singapore, or basket of junk shares of some emerging market that was hot), (ii) gap in price of that and something else, (iii) exchange value of usd:aud and difference in gap between whatever and yen:won), etc etc etc
in two years time ... and onn out to 10 years time
oh, but do not pay attention to the margin call feature - how can hsbc go down? and,
tell you what, bill, you are such a nice guy, i will apply to my boss to let you lever up, so you get 20% on $ 6m, and i get 5% on $ 20m, or, you really want to triple up ... shoot, i will try my best, then
bang! finance.yahoo.com and you are dead man walking, and i win |
