Jyske Bank branches throughout the offshore world, for instance, will lend serious money based upon assets in their control.
How does this work?
Is it a good idea?
They arrange for borrowing money in low-cost currencies like Yen where the interest rate was 1% and buying stuff like Norwegian Crowns where a while back the interest rate was closer to 10 %. They give huge leverage, but your backing assets on deposit have to assume the currency risk.
Downside? Sometimes such deals go against you and then it is easy to get wiped out in the search for a good spread. Arbitrage involves a transaction done all at once, so you don’t have the same risk of fluctuations. Using options allows the benefits of leverage without the risk of losing more than the option price. So this famous Danish banking product is really not worth the hassles.
If you really want, the BBBB Team have access to more discreet banks that can take care of such deals for you. Contact us for introductions
Post your comments, thoughts, related personal experiences, corrections or questions below.