Wednesday, August 23, 2006


My friend came across the following line in one of the Corporate Finance slides. Here it is in all its original glamour:

A firm takes a long position by buying a forward to hedge its short position in spot.

The Greek Medusa, we are told, had the effect of petrifying people with a glance. This sentence, I observe, establishes a striking functional parity with the above-mentioned character.

After squinting at the sentence for quite some time, I pronounced my verdict that it must be a misplaced cryptic crossword clue. Frankly, 20 hours of lectures on Debt, Equity, Forwards, Futures, NPV, APV took me nowhere close to decoding it.

Boy! How I love Corporate Finance.


chiranth said...

C'mon KR.. thought you were smarter than that ;-)

Anyways, CFin is a pain.. loved Prof Bhagwan's
jokes in class, but the subject is not even
remotely funny.

Good luck for the exams!

Anonymous said...

Actually, it is not that hard to understand. The firm is taking a short position in the current scenario, and hedging it by taking a long position in a future - what's so difficult?

Anonymous said...

anonymous,ok i dont know exactly what a short position in the context means,but even if i did(hopefully by tomorrow) the terminology is confusing for the uninitiated.

Disha said...

Corp Fin is what I'd call "Much ado about nothing" - Lotsa work and no grades. Its the prof Bhagwan who would need to figure out the tough question on grading 'To B or not to B'.

As far as I am concerned thats the long and short of it. :)

Good post..keep em coming