How Securities are Traded必看课件资料.ppt

CHAPTER 3 How Securities are Traded Margin Call Example 3.2 How far can the stock price fall before amargin call? Let maintenance margin = 30% Equity = 100P - $4000 Percentage margin = (100P - $4,000) / 100P (100P - $4,000) / 100P = 0.30 Solve to find: P = $57.14 Table 3.4 Illustration of Buying Stock on Margin Short Sales Purpose: to profit from a decline in the price of a stock or security Mechanics Borrow stock through a dealer Sell it and deposit proceeds and margin in an account Closing out the position: buy the stock and return to the party from which it was borrowed Short Sale:Initial Conditions Example 3.3 Dot Bomb 1000 Shares 50% Initial Margin 30% Maintenance Margin $100 Initial Price Sale Proceeds $100,000 Margin Equity $50,000 Stock Owed 1000 shares Example 3.3 (Ctd.)Dot Bomb falls to $70 per share Assets $100,000 (sale proceeds) $50,000 (initial margin) Liabilities $70,000 (buy shares) Equity $80,000 Profit = ending equity – beginning equity = $80,000 - $50,000 = $30,000 = decline in share price x number of shares sold short Short Sale - Margin Call How much can the stock price rise before a margin call? ($150,000* - 1000P) / (1000P) = 30% P = $115.38 * Initial margin plus sale proceeds Regulation of Securities Markets Major regulations: Securities Act of 1933 Securities Act of 1934 Securities Investor Protection Act of 1970 Self-Regulation Financial Industry Regulatory Authority CFA Institute standards of professional conduct Regulation of Securities Markets (Ctd.) Sarbanes-Oxley Act Public Company Accounting Oversight Board Independent financial experts to serve on audit committees of boards of directors CEOs and CFOs personally certify firms’ financial reports Boards must have independent directors Insider Trading Officers, directors, major stockholders must report all transactions in firm’s stock Insiders do exploit their knowledge Jaffe study: Inside buyersinside sellers = stock does well Inside s