資料教程文件

SecuritiesMarkets&EquityInvestmentscontinued...

ComputingIndexPrices

?. ., .T. stockpricesPrice-weightedIndex=——

adjusteddivisor

Value-weightedIndex

^(currentprices)(#shares)

=^ Xbasevalue

XXbaseyearprices)(#baseyearshares)

TypesofOrders

Executioninstructions:howtotrade;e.g.,marketorders,limitorders.

Criticalrelationshipbetweenkandg:

Asdifferencebetweenkandgcwidens,valueofstockfalls.

Asdifferencenarrows,valueofstockrises.

Smallchangesindifferencebetweenkandg

causelargechangesinstock’svalue.CriticalassumptionsofinfiniteperiodDDM:

Stockpaysdividends;constantgrowthrate.

Constantgrowthrate,g>neverchanges.

kmustbegreaterthangc(ormathwillnotwork)

EarningsMultiplierModel

fullprice=PVatlastcoupondatex(1+YTM)r/Taccruedinterest=couponpaymentx(t/T)where:

t=daysfrommostrecentcouponpaymentto

tradesettlement

T=daysincouponpaymentperiod

Matrixpricing:Forilliquidbonds,useyieldsofbondswithsamecreditqualitytoestimateyield;adjustformaturitydifferenceswithlinearinterpolation.

BondMarkets

Nationalbondmarketincludesdomesticbondsandforeignbonds.

Validityinstructions:whentoexecute;e.g.,stop

orders,dayorders,fill-or-killorders.

Clearinginstructions:howtoclearandsettle;forsellorders,specifyshortsaleorsaleofownedsecurity.

o

Di

Ej k-

PriceMultiples

payoutratio

k^

Domesticbonds.Domesticissuerandcurrency.

Foreignbonds.Foreignissuer,domesticcurrency.Eurobondmarketisoutsideanyonecountry,withbondsdenominatedincurrenciesotherthanthose

MarketStructures

Quote-drivenmarkets:investorstradewithdealers.Order-drivenmarkets:buyersandsellersmatchedbyrules.

Brokeredmarkets:brokersfindcounterparties.

FormsofEMH

Weakform.Currentstockpricesfullyreflectavailablesecuritymarketinfo.Volumeinformation/pastpricedonotrelatetofuturedirectionofsecurityprices.Investorcannotachieveexcessreturnsusingtechanalysis.

Semi-strongform.Securitypricesinstantlyadjusttonewpublicinformation.Investorcannotachieveexcessreturnsusingfundamentalanalysis.

Strongform.Stockpricesfullyreflectallinformationfrompublicandprivatesources.Assumesperfectmarketsinwhichallinformationiscostfreeandavailabletoeveryoneatthesametime.Evenwithinsideinfo,investorcannotachieveexcessreturns.

.EQUITYINVESTMENTS

IndustryLifeCycleStages

Embryonic:slowgrowth,highprices,largeinvestmentneeded,highriskoffailure.Growth:rapidgrowth,fallingprices,limitedcompetition,increasingprofitability.

Shakeout:slowergrowth,intensecompetition,decliningprofitability,costcutting,weakerfirmsfailormerge.

Mature:slowgrowth,consolidation,stableprices,highbarrierstoentry.

Decline:negativegrowth,decliningprices,consolidation.

FiveCompetitiveForces

Rivalryamongexistingcompetitors.

Threatofentry.

Threatofsubstitutes.

Powerofbuyers.

Powerofsuppliers.

One-PeriodValuationModel

Pi

(l+kc)

BesuretouseexpecteddividendDjincalculation.

InfinitePeriodDividendDiscountModels

Supernormalgrowthmodel(multi-stage)DDM:

leadingP/E= pricepershare

forecastEPSnext12mo,

trailingP/E= pricepershare

EPSprevious12mo.

P/B= pricepersharebookvaluepershare

P/S=pricepershare

salespershare

P/CF= pricepershare

cashflowpershare

FIXEDINCOME

BasicFeaturesofBonds

Issuer.Sovereign,non-sovereign,quasi-government,supranational,corporate,SPE.

Maturity.Moneymarket(oneyearorless);capitalmarket(greaterthanoneyear).

Parvalue.Bond’sprincipalvalue(facevalue).Coupon.Annualpercentofpar;fixedorfloating.Dividebyperiodicitytogetperiodicrate.

Currency.Single,dual,currencyoption.

Indenture.Affirmativeandnegativecovenants.

Price,Yield,CouponRelationships

Bondpricesandyieldsareinverselyrelated.Increaseinyielddecreasesprice;decreaseinyieldincreasesprice.

Coupon<yield:Discounttoparvalue.Coupon>yield:Premiumtoparvalue.

Constant-yieldpricetrajectory:Priceapproachesparasbondnearsmaturityfromamortizationofdiscountsandpremiums.Capitalgainsandlossesarecalculatedrelativetothistrajectory.

CashFlowStructures

Bullet:Allprincipalrepaidatmaturity.

Fullyamortizing:Equalperiodicpaymentsincludebothinterestandprincipal.

Partiallyamortizing:Periodicpaymentsincludeinterestandprincipal,balloonpaymentatmaturityrepaysremainingprincipal.

Sinkingfund:Scheduleforearlyredemption.Floating-rate:Couponpaymentsbasedonreferencerateplusmargin.

BondPricing

Therearetwoequivalentwaystopriceabond:

ofcountriesinwhichbondsaresold.

Globalbondstradeinbothanationalbondmarketandtheeurobondmarket.

BondIssuance

Underwrittenoffering:Investmentbanksbuyentireissue,selltopublic.

Besteffortsoffering:Investmentbanksactasbrokers.Shelfregistration:Registerentireissuewithregulatorsbutselloveraperiodoftime.

EmbeddedOptions

Callable:Issuermayrepayprincipalearly.Increasesyieldanddecreasesduration.

Putable:Bondholdermaysellbondbacktoissuer.Decreasesyieldandduration.

Convertible:Bondholdermayexchangebondfor

issuer’scommonstock.

Embeddedwarrants:Bondholdermaybuyissuer’s

commonstockatexerciseprice.

YieldMeasures

Effectiveyielddependsonperiodicity.YTM=effectiveyieldforannual-paybonds.

Semiannualbondbasis:YTM=2xsemiannualdiscountrate.

Currentyield=annualcoupon/price.

Simpleyield=currentyield±amortization.

Yieldtocallisbasedoncalldateandcallprice.Yieldtoworstislowestofabond’sYTCsorYTM.Moneymarketyieldsmaybeonadiscountoradd-onbasisandmayusea360-or365-dayyear.

Bond-equivalentyieldisanannualizedadd-onyieldbasedona365-dayyear.

ForwardandSpotRates

Forwardrateisarateforaloanthatbeginsatafuturedate.“Iy3y”=3-yearforwardrate1yearfromtoday.

Exampleofspot-forwardrelationship:(1+s2)2=(1+S^l+lyly)

YieldSpreads

G-spread:Basispointsabovegovernmentyield.

I-spread:Basispointsaboveswaprate.

Z-spread:Accountsforshapeofyieldcurve.Option-adjustedspread:AdjustsZ-spreadforeffectsofembeddedoptions.

InterestRateRisk

Interestrateriskhastwocomponents:reinvestmentriskandmarketpriceriskfromYTMchanges.Theseriskshaveopposingeffectsonaninvestor’shorizonyield.

Bondinvestorswithshorthorizonsaremore

V?=

D,

(1+k_)

+ + D- + n

(i+ke)n a+ker

Constantdiscountrateappliedtoallcashflows (YTM)tofindPV.Thisisabond’sflatprice(does

concerned withmarketpricerisk. ?Bondinvestorswithlonghorizonsaremore

where:P?= Dn+l

" (k.-ge)

Constantgrowthmodel:

y=Do(1+gc)= Di

0 ke“gc

notincludeaccruedinterest).

Discounteachcashflowusingappropriatespot

rateforeach.Thisisabond’s

includesaccruedinterest.Governmentbondsuseactualdaycounts;corporatebondsuse

concernedwithreinvestmentrisk.

Thehorizonatwhichmarketpriceriskandreinvestmentriskjustoffsetisabond’sMacaulayduration.Thisistheweightedaverageoftimesuntilabond’scashflowsarescheduledtobepaid.

continuedonnextpage...

FIXEDINCOMEcontinued...

Modifieddurationistheapproximatechangeinabondspricegivena1%changeinitsYTM:

Macaulayduration (V_)—(V+)

~~ 0+0 2V0(Ay)

Effectivedurationisrequiredifabondhas

ForwardContractValue

AttimeP.

Vt(T)=St+PVt(cost)-PVt(benefit)- F0(T)

(1+Rf)T-t

Atexpiration(timet=T):

payofftolong=ST-FQ(T)

Futuresvs.Forwards

embeddedoptions:

(v_)-(v+)

2Vo(Acurve)

Pricechangeestimatesbasedondurationonlyare

Forwards

PrivatecontractsUniquecontractsDefaultrisk

Littleornoregulation

Futures

Exchange-tradedStandardizedcontractsGuaranteedbyclearinghouseRegulated

improvedbyadjustingforconvexity:

1

%Aprice=—duration(Ay)H—convexity(Ay)'

Asset-BackedSecurities

ResidentialMBS',homemortgagesarecollateral.AgencyRMBSincludeonlyconformingloans;nonagencvRMBSmayincludenonconformingloansandneedcreditenhancement.

Prepaymentrisk-,contractionriskfromfasterprepayments;extensionriskfromslowerprepayments.

CMOs:pass-throughMBSarecollateral.Mayhavesequential-payorPAC/supportstructure.

CommercialMBS:non-recoursemortgagesoncommercialpropertiesarecollateral.

AutoABS:autoloansarecollateral.

CreditcardABS:creditcardreceivablesarecollateral.

CDOs:Bonds,bankloans,MBS,ABS,orotherCDOsarecollateral.

CollateralandCreditEnhancement

Securedbondsarebackedbyspecificcollateralandseniortounsecuredbonds.

Unsecuredbondsaregeneralclaimstoissuer’scash

flowsandassets.

Internalcreditenhancement:Excessspread,overcollateralization,waterfallstructure.

Externalcreditenhancement:Suretybonds,lettersofcredit,bankguarantees.

CreditAnalysis

Investmentgrade:Baa3/BBB-orabove

Non-investmentgrade:Bal/BB+orbelowCorporatefamilyrating(CFR):issuerrating.Corporatecreditrating(CCR):securityrating.“FourCs”:capacity,collateral,covenants,character,

defaultrisk=probabilityofdefault

ForwardRateAgreements(FRA)

Canbeviewedasaforwardcontracttoborrow/lendmoneyatacertainrateatsomefuturedate.

InterestRateSwaps

Maybereplicatedbyaseriesofoff-marketFRAswithpresentvaluesatswapinitiationthatsumtozero.

Options

Buyerofacalloption—longassetexposure.

Writer(seller)ofacalloption—shortassetexposure.

Buyerofaputoption—shortassetexposure.

Writer(seller)ofaputoption—longassetexposure.

intrinsicvalueofacalloption=Max[0,S—X]intrinsicvalueofaputoption=Max[0,X-S]

Americanvs.EuropeanOptions

Americanoptionsallowtheownertoexercisetheoptionanytimebeforeoratexpiration.Europeanoptionscanbeexercisedonlyatexpiration.ValueofAmericanoptionwillequalorexceedvalueofEuropeanoption.Theywillhaveidenticalvaluesexceptfor:(1)calloptionsondividendpayingstocksand(2)in-the-moneyputoptions.

FactorsthatAfifectOptionValues

Increasein: Calls Puts

Assetprice Increase Decrease

Exerciseprice Decrease Increase

Risk-freerate Increase Decrease

Volatility Increase Increase

Timeto Increase Increase*expiration

Holdingcosts Increase Decrease

ALTERNATIVEINVESTMENTS

HedgeFunds

Event-drivenstrategies:mergerarbitrage;distressed/restructuring;activistshareholder;specialsituations.

Relativevaluestrategies:convertiblearbitrage;asset-backedfixedincome;generalfixedincome;volatility;multi-strategy.

Equitystrategies:marketneutral;fundamentalgrowth;fundamentalvalue;quantitativedirectional;shortbias.

Macrostrategies:basedonglobaleconomictrends.Hedgefundfees:

“2and20”:2%managementfeeplus20%incentivefee.

Hardhurdlerate:incentivefeeonlyonreturnabovehurdlerate.

Softhurdlerate:incentivefeeonwholereturn,butonlypaidifreturnisgreaterthanhurdlerate.

Highwatermark:noincentivefeeuntilvalueexceedsprevioushigh.

PrivateEquity

Leveragedbuyouts:managementbuyouts(existingmanagers),managementbuy-ins(newmanagers)Venturecapitalstagesofdevelopment:

Formativestage:angelinvesting,seedstage,earlystage.

Laterstage:financeproductdevelopment,marketing,marketresearch.

Mezzaninestage:prepareforIPO.

Portfoliocompanyvaluationmethods:market/comparables;discountedcashflow;asset-based.Exitstrategies:tradesale;IPO;recapitalization;secondarysale;write-off.

lossseverity=percentofvaluelostifborrower

defaults

Holdingbenefits

Decrease Increase RealEstate

Includesresidentialproperty;commercialproperty;

expectedloss=defaultriskxlossseverityrecoveryrate=1-expectedlosspercentage

—D.--ERIVATIVE