Concentrated position - Monetization

CFA Level III
#1

For monetization purpose, below 5 methods can get higher LTV right?

  • Short sale against the box

  • Equity Forward sale contract

  • Forward conversion with options

  • Total return equity swap

  • Prepaid variable forward

Only protective put is lower, 50% LTV (based on margin lending rules session in CFA curriculum).

If the question asks client wants to have LTV as high as possible, we should avoid using put option? Thanks.

#2

Under a risk based system,if the stock is completely hedged by a long put,the bank or broker can lend 100%of the put strike price to the investoreven if the loan proceeds are used to buy additional shares…

hope this helps

#3

Thanks, so we should look closely the exam is referring to rule-based or risk-based system. Thanks.

#4

You are welcome…!!!