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 were drawn by UBS marketed to customers as highly liquid and safe alternatives to cash. UBS decision is urgent to leave when Citigroup, another leading underwriter of ARS decides, their auctions fail, so that customers with illiquid assets of uncertain value. The case examines theoretical and practical as … Read more »

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 were drawn by UBS marketed to customers as highly liquid and safe alternatives to cash. UBS decision is urgent to leave when Citigroup, another leading underwriter of ARS decides, their auctions fail, so that customers with illiquid assets of uncertain value. The case examines theoretical and practical aspects of liquidity risks and challenges students to evaluate the benefits of honoring implicit commitments to customers on the cost of purchase of billions of dollars in illiquid assets. (B) and (C) cases examine the impact of the UBS decision.
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Daniel B. Bergstresser,
Shawn Cole,
Siddharth Shenai
Source: HBS Premier Case Collection
23 pages.
Release Date: 5th March 2009. Prod #: 209119-PDF-ENG
UBS and Auction Rate Securities (A) HBR case solution