This Case is about Finance, International
Publication Date: 05/06/2016
This was a complicated swap deal that brought immediate advantages to Metro do Porto but proved disastrous in the long run. It was not clear whether the firm entered into this arrangement out of ignorance, political pressure, or both, but the end result was a suit. Pupils are expected to examine the conditions of this swap and determine whether Metro do Porto should have been able to expect the potential losses and whether the swap made up great practice from a risk management standpoint.
Learning Objective: This case is proposed for the graduate students who comprehend the inner workings of a plain vanilla swap and are knowledgeable about the notion of an interest rate swap.
The case will help those pupils to proceed to understanding exotic instruments structured by investment banks for their customers, researching the subsequent important facets of using financial derivatives for risk management:
The possibility for derivatives to increase as opposed to reduce danger for a business.
The narrow line between theorizing on anticipated market movements and using derivatives for hedging risks.
What inspires business executives and bankers to enter into derivatives trades that are complicated.