Business Case Studies & Business Publications

The Misadventures of Daring Dave: Levera...

schillm@darden.vir...

Case

The Misadventures of Daring Dave: Leverage and Investment Returns

schillm@darden.virginia.edu

F-1686 | Published January 23, 2013 | 11 pages Case

Collection: Darden School of Business

Product Details

Daring Dave is a focused niche case used in Darden's second-year elective "Securities Markets in Action" where students need to understand the power and impact of leverage and margin requirements on investor performance. This case would also work well in case-based investments courses and courses on financial trading. This case considers the return and liquidity effects of leverage on investment returns for novice investor, Daring Dave, in a single equity security. Through a play-by-play description of Dave’s investment experience over a single week, students are introduced to the mechanics of trading on margin, margin calls, and the value of liquidity for risky, levered positions.

1. Explore the mechanics of trading on margin, margin accounting, and margin calls. 2. Introduce students to the intuition for margin loan terms from the perspective of securities brokers. 3. Build appreciation for the importance of liquidity for risky leveraged positions.