Arab Academy for Science, Technology & Maritime Transport

MBA Program
Investment And Portfolio Management

Assignment
In finance, margin is a collateral that the holder of a financial instrument has to deposit
with a counterparty to cover some or all of the credit risk the holder poses for the
counterparty.
a.Does implementing margin trading affect the liquidity of the Egyptian Stock
Exchange? Discuss.

The margin system allows the customer to buy a security by paying a part of its value in
cash, while the rest is paid by a loan from the brokerage company which he deals with,
with the guarantee of the securities subject of the deal, and a large number of dealers
turned to this system in light of the great decline in liquidity, which prompted the use of
the margin purchase mechanism or what is known as "margin", to finance their trading
in the market.

The implementation of margin trading can have a significant impact on the liquidity of
the Egyptian Stock Exchange. Margin trading allows investors to borrow money from
their broker to purchase additional shares, which can increase the amount of capital
available for trading and thus increase liquidity. This increased liquidity can lead to more
efficient price discovery and reduced transaction costs, as well as increased market
depth and improved order execution.

However, margin trading also carries risks that could potentially reduce liquidity. For
example, if investors are over-leveraged or take on too much risk, they may be forced to
liquidate their positions quickly in order to meet margin calls. This could lead to a
sudden influx of sell orders that could overwhelm the market and reduce liquidity.
Additionally, if investors are unable to meet margin calls, their positions may be
liquidated by their broker at a loss, which could further reduce liquidity.

Margin Trading Risk

1.Investors cannot only lose their initial investment but may lose more.
2.Investors must be ready to deposit additional cash or securities in their accounts on a
short notice to cover market losses.
3.Brokerage firms may sell some or all the investors’ securities without consulting them
in order to pay off the margin loan made to them, if margin calls are not satisfactorily
met.
 4.Investors must take into consideration that brokerage firm will charge them interest
for borrowing money
Overall, the implementation of margin trading can have both positive and negative
effects on the liquidity of the Egyptian Stock Exchange. It is important for investors to
understand the risks associated with margin trading before engaging in it so that they
can make informed decisions about how much risk they are willing to take on.

2. Choose a bank that is operating in Egypt and discuss the following points:
a.List the different types of certificates of deposits issued by the bank that you chose
taking into consideration different maturities.

b.Compare the rates of different certificates of deposits with the risk free rate and
comment on your comparison taking into consideration the characteristics of those
investment alternatives.

BANQUE MISR
All in EGP currency local

CD TENOR Interest payment Interest Interest Rate Mini Renewable

frequency Type Purchase
Amount/
Multiples

AL QIMMA 3Y FIXED
Certificate Monthly 16%

Quarterly 16.25%
1000 YES
Semi 16.50%
Annually

Annually 17.25%

Al Tholatheya 3Y Variable NO
Certificate MONTHLY Daily 500
variable
QUARTERLY rate
 16.5% 1000

Certificate of 5Y FIXED YES

deposit 5 years MONTHLY 12.25 1200

ANNUALLY 12.50 1000

Certificate of 7Y MONTHLY FIXED 12.75 750 YES

deposit 7 years

AMAN EL 3Y At maturity FIXED 13% 500/1000 YES

MASREYEEN 1500/2000 (For two
CERTIFICATE OF /2500 similar
DEPOSIT periods)