UBS and Auction Rate Securities (B)

Posted: 1 Jul 2009

See all articles by Daniel Bergstresser

Daniel Bergstresser

Brandeis International Business School

Shawn Allen Cole

Harvard Business School

Siddharth Bhaskar Shenai

Harvard Business School

Date Written: March 26, 2009

Abstract

UBS, a global financial services company, must decide whether to continue to support the market for Auction Rate Securities in the face of a growing financial crisis. These instruments, underwritten by UBS, were marketed to clients as highly liquid and safe alternatives to cash. UBS' decision becomes urgent when Citigroup, another leading underwriter of ARS, decides to let their auctions fail, leaving clients with illiquid assets of uncertain value. The case explores theoretical and practical aspects of liquidity risk, and challenges students to evaluate the benefits of honoring implicit commitments to customers against the costs of acquiring billions of dollars in illiquid assets. The (B) and (C) cases consider the implications of UBS decision.

Suggested Citation

Bergstresser, Daniel B. and Cole, Shawn Allen and Shenai, Siddharth Bhaskar, UBS and Auction Rate Securities (B) (March 26, 2009). HBS Case No. 209-131; Harvard Business School Finance Unit. Available at SSRN: https://ssrn.com/abstract=1426209

Daniel B. Bergstresser (Contact Author)

Brandeis International Business School ( email )

Waltham, MA 02454
United States
6174162324 (Phone)

Shawn Allen Cole

Harvard Business School ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

Siddharth Bhaskar Shenai

Harvard Business School ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

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