Lehman Brothers:An Overview

The Lehman brothers is a 150 year old company went through a metamorphosis in 1993 after American Express divested Shearson and the independent firm came to be known as Lehman Brothers. Thus Lehman Brothers proclaims 1993 as its year of birth.Its area of working is categorical and is pivoted at investment banking with some focus on equity and fixed income.Its clientele spreads across the world. Though centered mainly in U.S., their clientage in Europe and Asia(10%) is significantly higher than their adversaries. Its headquarters are in New York,London and Tokyo.They serve the financial needs of various corporates, municipalities and other government institutions too.
They have partitioned their working into 2 parts:
-front office and
-mid office
Front office work can be further severed into the following sections:investment banking, salesdesk, equity and fixed income.In mid-office,that is effectively their back end,there are four main divisions:- Risk management,Operations,Finance and Information Technology. Their main stress was on the Risk management position during their presentation.
Before stressing on the desired job profile there was a statistical capitulation of their increasing capital and revenue.Upto the 3rd quarter their revenue has gone upto $8.7 million from $0.1million(when they started in 1993) which they claim to be a record in their history and expect a even higher return in the 4th quarter.
Marked accentuation was given to the gross increase in number of employees (about 43%) due to their recent acquisitions like Neuberger Berman in 2003 while other companies are cutting down their staff.Their felicity due to the Neuberger Berman acquisiton was obvious considering the significnt increase in their assets under management because of it.
Before explaining the role of a credit risk manangent research analyst, they categorized risk into four classes:
-Credit Risk
-Market
-Lquidity
-Operational
Credit risk presents the possibility the the party may be unable to pay the firm in accordnce with its contractual obligations.eg:Bankurptcy
Market Risk presents thepossiblity that the party may not be willing to pay the firm.eg:preference to other creditors.
Lquidity Risk covers the possibilty that an investment may not be sold as effectively as expected by the firm.
Then after some examples and stress on the signifance of each type of risk, the discussion was directed to the credit risk management. Credit management was further categorized into 3 sub-parts:
-Credit reporting
-Credit analysis
-Credit measurement
After breifing on the desired candidates' profile they elaborated on life at Lehman Brothers. Their main point of emphasis was on how they take care of even the minutiae concern of their employees preventing it from becoming a botheration. They substantiated htis point by explaining the role of a retention manager assigned to each unit, their approach on maternity issues, special child care plans in which employees are allowed to bring their children with them to work, etc.
Then as the discussion moved to details of Credit Risk Management Research Analyst program I opened my personal dairy...

more on software companies of the west...

vmware is a fast growing comapny. it is tripling in revenues every year. it is a platform on which one can run every operating system. this is useful on a dektop surely but even more useful on a server machine since vmware memory overhead is not significant comapred to the actual allocation to the operating systems. and it allows the same istallation to have strengths of linux and m$ server market. a new product called vmotion actually facilitates moving a running server from a server to another. but the minus point is obviously that the work is very technical and apart from the design team which is reasonably unapproachable without a PhD, the work does noit have muchy perspective and the submodules are difficult but very technical.

oracle is of course the industry leader in databases. the subgroup that is hiring is also involved in very good work. specifically it has projects like maintaining concurent distributed transations across processors. again the work is technical and the rewards are not short term and are not really too apparent to the guys making the submodule either.

amazon is also a very ambitious company and is a rage at the stock market. it has really high paying jobs in the IT sector and since they are essentially in a very lucrative paret of IT sector it is a great lace to be right now. long term job satisfaction is not guaranteed though.

google stands out of the crowd. at the moment. It is a company with the best salaries, flattest governance architectures, and tons of very exciting and diverse projects. the only minus point is the sustainability of emoployee enthusiasm. it is hiring at a precocious pace and with unchallenged salaries. all these will creep up to ask profitability questions once they enter a glitch in one of their core competencies or some player divides up their core competency and eats into a few parts of it. after it's ipo the flatness of its architectures is disappearing fast. all in al it is a risk as well as an opportunity.

finance versus silicon valley

this post pertains to job selection.
a friend of mine is just graduating from grad school and he is looking at job offers and the following is a precis of what we discussed about this choice.
financial services sector has it requirements which they choose to cater to themsleves and not through franchising traditional software companies like oracle and mircrosoft although these companies have long tried to make a foray into this sector. the it divisions of new york companies vary in size from 10000 (goldman sachs) to 100 (KBC) . they are located in downtown manhattan or uptown connecticut. susqehanna is actually located in a wonderful suburb of philadelphia and is also a great option. a prticularly stellar company my friend did not get an offer from is bridgewater, located in connecticut. morgan stanley located in white plains NYC is great because it has such a young it sector with such young and fresh people and such stellar success that the prospects of vertical and lateral growth seem promising. also as far as a guy planning a startup it is a very fertile ground since the ideas and the technologies and the algorithms that one can generate here can be taken with a small suitable team to fledgling markets like south asia and south america something like four to five years from now and it would be tremensously rewarding because the institutional support needed for these to work need this time to grow in such companies and even we need this time to gerner this experience and knowledge and contacts. as far as the west coast is concerned google, amazon, microsoft, vmware and oracle all have their plus points. more in the next post...

Market Makers

Market Maker

A "market maker" is a firm that stands ready to buy and sell a particular stock on a regular and continuous basis at a publicly quoted price. You'll most often hear about market makers in the context of the Nasdaq or other "over the counter" (OTC) markets. Market makers that stand ready to buy and sell stocks listed on an exchange, such as the New York Stock Exchange, are called "third market makers." Many OTC stocks have more than one market-maker.

Market-makers generally must be ready to buy and sell at least 100 shares of a stock they make a market in. As a result, a large order from an investor may have to be filled by a number of market-makers at potentially different prices.

Bonds

In finance and economics, a bond or debenture is a debt instrument that obligates the issuer to pay to the bondholder the principal (the original amount of the loan) plus interest. Thus, a bond is essentially an I.O.U. (I owe you contract) issued by a private or governmental corporation. The corporation "borrows" the face amount of the bond from its buyer, pays interest on that debt while it is outstanding, and then "redeems" the bond by paying back the debt. A mortgage is a bond secured by real estate.

Bonds are securities but differ from shares of stock in that stock is an ownership interest (termed "equity"), but bonds are merely "debt": Therefore a shareholder is an owner, but a bond-holder is merely a creditor.

Each country sets its own rules for issuing and redeeming short and long-term debt and stock. In the U.S. (for example):

• Bonds are long-term loans secured by property rather than short-term loans secured merely by the debtor's promise to pay.

• Interest paid to bondholders receives preferential tax treatment compared to dividends paid to shareholders.

• In bankruptcy, bondholders are paid before short term creditors (including workers who are owed wages) and all creditors must be paid in full before owners receive anything.

asset valuation

companies are lways searching for assets that are worth more to them than the holders.
opportunity cost of capital allows one to work for a future return on investment.
fundamental objective of corporate finance: maximizing the current market value of the firm's outstanding shares.
this objective for instance overrides objectives like maximizing profits
PV = discount factor * C1

financial manager overview

overall task of a financial manager:
(1) the investment or capital budgeting, decision and
(2) the financial decision.

i.e.

(1) what real assets to buy and
(2) how to raise the cash

Banks .. Money inflow

When banks end money to the firm, they insist on a formal contract stating the rate of interest and repayment dates, perhaps placing restrictions on dividends or additional borrowing. But you can't devise written rules to cover every possible future event. So written contracts are incomplete and need to be supplemented by understandings and by arrangements that help to align the interests of the various parties.

Definitions

Not all businesses are corporations. Small ventures can be owned and managed by a single individual. They are called sole proprietorships. In other cases several people may join to form a partnership.
a public company is one whose shared are held not only by a small group of investors but a large body of the workforce too. Although stockholders own a corporation they do not manage it. Instead they vote to elect a board of directors. the board appoints top management and is supposed to ensure that they act in the company's interests. the separation of ownership and management gives corporations permanence.
corporations have limited liability.

definitive post

In this blog we will go through a course in corporate finance.