最新AssetValuationMarketandInstruments名師精編資料匯編

1、十二 Asset Valuation: Market and Instruments1: Preliminary Reading Selecting Investments in Global Marketa: Discuss the characteristics of fixed-income securities available to investors, including US Treasury securities, corporate bonds, and Eurobonds.Fixed income investmentshave a contractual repayme

2、nt schedule. By purchasing afixed-income security, you are lending money to the issuer. The money lent out is called theprincipal. In return, the borrower promises to make periodic interest payments and, at maturity,pay back the principal.U.S. Treasury securitiesare bills, notes, and bonds. Governme

3、nt obligations are consideredriskless because there is little chance of default, and they are very liquid.Corporate bondsare fixed- income securities issued by businesses. The bond s indenturelists the terms of the loan, which includes the payment schedule and any call or refundingprovisions that al

4、low the bond to be redeemed prior to maturity. The indenture also specifiessinking fund provisions. These require the issuer to redeem a given percentage of theoutstanding issue prior to maturity to protect the bondholders. Bonds are generally categorizedby the type of security they offer their hold

5、ers.A Eurobond is an international bond denominated in a currency other than that of the countrywhere the bond is issued. Eurobonds includeEurodollar bonds and Euroyen bonds. AEurodollar bond is denominated in U.S. dollars and sold outside the U.S. to non-U.S.investors.b: Discuss the characteristics

6、 of equity securities available to investors, including classes of stock and American Depository Receipts.Common stockrepresents ownership of the firm. Owners of the common stock of a firmshare in the company s successes and failures. In vesting in common stock is a relatively risky investment compa

7、red with fixed-income securities.Common stock classifications:1.2.By industry: Industrial, utilities, transportations, and financial institutions.By domestic versus foreign.Buying foreign equities:1.Purchase of American Depository Receipts (ADRs). ADRs are shares issued by U.S.banks representing an

8、ownership interest in the actual shares, which are held indeposit in a bank in the issuing firm s country.2.Purchase of American shares. American shares are securities issued in the U.S. by a transfer agent acting on behalf of a foreign firm.3.Direct purchase of foreign shares. Here you buy the shar

9、es in the country where the firm is listed. This requires payment in the foreign currency and transferring the certificates to your own country.4.Purchase of international mutual funds. Numerous investment companies invest instocks outside the U.S. The alternatives range from global funds , which in

10、vest in both U.S. stocks and foreign stocks, to international funds , which invest almost whollyoutside the U.S. Mutual funds are a convenient method of global investing, particularly for small investors.c: Discuss the characteristics of derivative investments (e.g. options, futures).Warrants are op

11、tions issue d by a firm, giving the holder the right to acquire the firm s commonstock from the firm at a specified price within a designated time period.Call optionsare similar to warrants. A call is the option to buy the common stock of a firmwithin a given time period at a specified price (called

12、 the striking price). A call option differsfrom a warrant, because it is not issued by the firm but by another investor who is willing toassume the other side of the transaction. Options are also typically valid for a shorter timeperiod than warrants.Put optionsare the right to sell a given stock du

13、ring a given time period at a specified price.Puts are used by investors who expect a stock price to decline during the specified period orby investors who own the stock and want protection from a price decline.Futures contractsare contracts for the delivery of a commodity at some future date. Thecu

14、rrent price of the futures contract is determined by the participants beliefs about the futureprice of the commodity.Financial futuresare available on financial instruments such as T-bills, Treasury bonds, andEurobonds. These futures contracts allow individual investors, bond portfolio managers, and

15、 corporate financial managers to protect themselves against volatile interest rates.d: Discuss the characteristics of various alternative investments (e.g. investment companies, real estate, low-liquidity investments).Investment companies. Instead of direct investment, many investors choose to acqui

16、re theirinvestments indirectly by purchasing shares in mutual funds. Categories of mutual funds include money market funds, bond funds, common stock funds, equity funds, international funds, and balanced funds.Real estate is an important investment option that can greatly improve the diversity of yo

17、ur portfolio since real estate returns have a low correlation with stock and bond returns. The easiest form of real estate investment is the purchase of shares in a Real Estate Investment Trust. REITs are investment pools specializing in one of a variety of real estate assets. They are similar to mu

18、tual funds. You can invest in construction and development REITs, mortgage pool REITs, or REITs that own and manage properties.Investing in low liquidity assetslike art, antiques, stamps, and coins is generally consideredto be a hobby rather than an investment. This viewpoint comes from the fact tha

19、t most of these investments require a great deal of specialized knowledge and expertise to be truly profitable. These investments usually offer very low market liquidity, high transactions costs and high price variability.1.A: Organization and Functioning of Securities Marketsa: Describe the charact

20、eristics of a well-functioning securities market.1.Provide timely and accurate informationon the price and volume of past transactionsand on the supply of and demand for current goods and services.2.Provide liquidity. Liquidity is the ability to buy or sell quickly at a known price. Liquidityrequire

21、s:Marketability being able to sell quickly.Price continuity -prices that don t change much from one transaction tothe next in the absence of new news.Depth -there are numerous buyers and sellers willing to trade at pricesabove and below the current price.3.Internal efficiency, which means getting th

22、e lowest possibletransactions cost .4.Informational or external efficiency,which means prices rapidly adjust to newinformation so that the prevailing market price reflects all available information regarding the asset.b: Distinguish between primary and secondary capital markets and explain how secon

23、dary markets support primary markets.Primary capital marketsrelate to the sale of new issues of bonds and preferred and commonstock.Secondary financial marketsare where securities tradeaftertheirinitial offering.Secondary markets are importantbecause they giveinvestorsliquidity.Liquidity enables inv

24、estors to sell quickly. Thegreaterthe liquiditysecuritieshave,themore willinginvestors are tobuy securities. Liquid secondary markets also provide investors withcontinuous informationabout the market price of their securities. Thebetterthesecondarymarket,theeasieritis forfirmsto raiseexternalcapital

25、.c: Distinguish between call and continuous markets.Call markets are markets in which the stock is only traded at specific times. All trades, bids, and asks are declared, and then one negotiated price is set that clears the market for the stock. This method is used in smaller markets and to set the

26、opening price in major markets.Continuous marketsare markets where trades occur at any time the market is open.The price is set by either the auction process or by dealer bid-ask quotes.d: Compare and contrast the structural differences among national stock exchanges, regional stock exchanges, the o

27、ver-the-counter (OTC) market, and the "third" and "fourth" markets.The major national exchanges trade shares for a large number of prestigious firms that aregeographically dispersed to a diverse clientele.Regional exchangesserve smaller local firmswithin various countries. The li

28、sting requirements for regional exchanges are usually much less stringent than large national exchanges. The over-the-counter (OTC) market includes the trading in all securities not listed on one of the registered exchanges. If any registered dealer is willing to make a market in a security, it can

29、trade in the OTC market. The OTC market is a negotiated market where investors negotiate directly with the dealers. In contrast, the registered exchanges are continuous auction markets where the broker acts as an intermediary between the buyer and seller.Stocks listed on a registered exchange may al

30、so be traded in the Over-The-Counter market. Non-member investment firms can make markets in and trade registered securities without going through the exchange. This segment of the OTC market is called the Third Market .The Fourth Market describes the direct exchange of securities between investors

31、without using the services of a broker as an intermediary. Directly negotiated sales are done by investors to save transactions costs.e: Discuss major characteristics of exchange markets, including exchange membership, types of orders, and market makers.Market structure characteristics:1.When buyers

32、 and sellers submit their bid and ask prices to a central location andtransactions are matched by brokers who do not have a position in the stock, you havea system called apure auction market. An auction market is aprice-driven market.2.When the buyer and seller submit their orders to dealers, who e

33、ither buy the stock fortheir own inventory or sell the stock from their own inventory, thisorder driven systemis called a dealer market.Membership categories at U.S. exchanges:1.The specialist controls the limit order books.2.The commission brokertrades for a brokerage firm.3.Floor brokersact as fre

34、e-lance brokers for other commission brokers.4.Registered traderstrade for their own accounts.Types of orders:1.Market ordersare orders to buy or sell at the best price available.2.Limit ordersare orders to buy or sell away from the current market price. A limit buy isplaced below the current price

35、and a limit sell is placed above the current price. Limitorders must be timed: instantaneous, 1 day, 1 week, 1 month or good till canceled.Limit orders are turned over to the specialist by the commission broker.Market makerson the U.S. exchanges are calledspecialists . Specialists provide two basicf

36、unctions to the exchange:1.They act as brokers handling thelimit order book , where limit and stop orders aremaintained.2.They act as dealers by buying and selling stocks for their own accountsto maintain anorderly market and provide liquidityto the market if there is an inadequate order flow.f: Des

37、cribe the process of selling a stock short and discuss an investor's likely motivation for selling short.Short salesare orders to sell securities that the seller does not own. Short-sale procedures:The seller must borrow the securities from a broker before selling them.The seller must inform the

38、ir broker that the order is a short sale before the transaction is placed.The seller must return the securities at the request of the lender or when the short sale is closed out. The short seller does not get the proceeds of the short sale.Why would anyone ever want to sell securities short? The sel

39、ler thinks the current price is too high and that it will fall in the future. So, the seller is selling high and then buying low.g: Discuss the technical points affecting short sales.The following three rules (i.e., technical points) apply to short selling:The uptick rule states stocks can only be shorted in an up market. Thus, a short sale can only trade at a price higher than the previous trade. Zero ticks, where there is no price change, keep the sign of the previous order.The short seller mustpay all dividendsdue to the lender of the security.The short seller must also deposi