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HOME
PPP
History
Occurrence
What is PPP?
Process?
MTN
MTN
High Efficient Market
Which Notes are Used??
Arbitrage & Leverage
Explanation of the Leverage Effect
TRADE
Trade
How does the Investor Make Profits?
Claim
Risk
Controls
Profitability
PROCESS
CONTACT
HOME
PPP
History
Occurrence
What is PPP?
Process
MTN
MTN
High Efficient Market
Which Notes are Used??
Arbitrage & Leverage
Explanation of the Leverage Effect
TRADE
Trade
How does the Investor Make Profits?
Claim
Risk
Controls
Profitability
Process
Contact
MEDIUM TERM NOTES
Home
EXPLANATION OF THE LEVERAGE EFFECT
Once the investment contract is signed and endorsed by the Trading Bank, the Investor transfers the funds to the Depot Bank.
The Depot Bank mirrors this account (with the full total amount) to the Trading Bank.
The Trading Bank accepts the blocking via mirror and orders funds from the Central Banks of the G7, against these blocked funds.
Example with an Investment amount of 100.000,00 €
100.000,00 € x 17 = 1.700.000,00 €
The amount of credit line is equivalent to x 17 leverage effect
.
1.700.000,00 € ÷ 0,98% = 16.600,00 €
The Trading Bank is responsible to pay for the 1.700.000,00 € an annual interest of 0,98%
.
1.700.000,00 € ÷ 7,50% = 127.500,00 €
The Trading Bank uses the funds to issue MTN with an annual coupon of 7,5%
.
1.700.000,00 € ÷ 6,52% = 110.840,00 €
Once
MTN
are issued and sold to End buyer, the Trading Bank makes a net profit of 6,52% (7,50% minus 0,98% Euro Libor Annual interest = 6,52%)
.
The Investor invested 100.000,00 € and the Trading Bank has 110.840,00 € profit. The quote or the percentage are only examples.
