How can the prime brokerage area of a bank lose money? a. If it isn't one of
Question:
How can the prime brokerage area of a bank lose money?
a. If it isn't one of the top 2-3 prime brokers, it is very hard to make money and it will likely be a "loss leader" for other areas of the firm
b. If it brokers bad transactions and one side or the other backs out without settling
c. If it invests in subprime mortgages instead of prime mortgages, it is likely to lose money perhaps 1 out of 20 years, though will be more profitable in other years.
d. If margin calls to customers are not met, the prime broker will liquidate the customer's positions. If the proceeds from long positions are not sufficient to pay off the balance due to the prime broker from the portfolio margin loan (plus any amount required to close out short positions), the prime broker may face a loss as it has a remaining uncollateralized claim against the customer.
International Marketing And Export Management
ISBN: 9781292016924
8th Edition
Authors: Gerald Albaum , Alexander Josiassen , Edwin Duerr