Nikkei225 Reconstitution

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Date Submitted: 09/25/2012 07:22 AM

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The Nikkei 225 Reconstitution

The objective of this case is to understand the effects of demand on security prices, and to understand the role of price impact on trading decisions

1. As a portfolio manager for the UNIL Advisors Nikkei 225 Index fund, which has ¥100 billion of assets linked to Nikkei 225 index, what would you do when you hear the news of index reconstitution?

2. What would you do if, instead, you were at the proprietary trading desk of Goldman Sacs?

Strategic Capital Management, LLC (SCM)

The objective of this case is to develop an understanding of how arbitrage acts to enforce the law of one price. It also provides a venue to discuss the various real world imperfections that can prevent arbitrageurs from eliminating mispricing in the equity markets.

1. Is there an arbitrage opportunity based on market valuations of Creative Computers and Ubid as on December 9th, 1998.

2. If yes, how would you take advantage of it?

3. What are the potential risks of such a strategy?


The objective of this case is to understand the pricing of convertible bond and how it may be utilized profitably in merger transactions (you may ignore the part of the case dealing with issues of corporate control)

1. How would you price the ORAN at issue? Is it fairly priced? How does the price of ORAN on Feb 9th, 2004, imply about the probability of deal succeeding?

2. What is the fair price of MONY stock? If this is different from the market price of $31.55, how do you explain the difference?

Risk Arbitrage: Abbott Labs and Alza

The objective of the case is to analyze an arbitrage position in a merger and acquisitions situation.

1. Green Circle shorted 312,000 Abbott shares and longed 260,000 Alza shares. How did they determine these positions?

2. As Chris Smith, would you close the position, invest more, or hold on?