Instruments(金融工程南开大学,王小麓)).pptxVIP

Chapter 2 Financial Marketsand InstrumentsMajor Classes of Financial Assets or SecuritiesDebt Money market instruments BondsCommon stockPreferred stockDerivative securitiesMarkets and InstrumentsMoney MarketDebt InstrumentsDerivativesCapital MarketBondsEquityDerivativesMoney Market InstrumentsTreasury billsCertificates of depositCommercial PaperBankers AcceptancesEurodollarsRepurchase Agreements (RPs) and Reverse RPsFederal FundsMoney Market Instrument YieldsYields on Money Market Instruments are not always directly comparable.Factors influencing yields. Par value vs. investment value360 vs. 365 days assumed in a year (366 leap year)Bond equivalent yieldBank Discount Rate (T-Bills)Rbd = bank discount rateP = market price of the billn = number of days to maturityBond Equivalent YieldCan’t compare T-bill directly to bond:360 vs 365 days Return is figured on par vs. price paidAdjust the bank discounted rate to make it comparable.Bond Equivalent Yield: Sample T-BillCapital Market - Fixed Income InstrumentsPublicly Issued InstrumentsUS Treasury Bonds and NotesAgency Issues (Fed Gov)Municipal BondsPrivately Issued InstrumentsCorporate BondsMortgage-Backed SecuritiesCapital Market - EquityCommon stockResidual claimLimited liabilityPreferred stockFixed dividends - limitedPriority over commonTax treatmentStock IndexesUsesTrack average returnsComparing performance of managersBase of derivativesFactors in constructing or using an Index Representative? Broad or narrow? How is it constructed?Examples of Indexes - DomesticDow Jones Industrial Average (30 Stocks)Standard Poor’s 500 CompositeNASDAQ CompositeNYSE CompositeWilshire 5000Examples of Indexes - Int’lNikkei 225 Nikkei 300FTSE (Financial Times of London)DaxRegion and Country IndexesEAFEFar EastUnited KingdomBond IndexesLehman BrothersMerrill LynchSalomon BrothersSpecialized IndexesMerrill Lynch MortgageConstruction of IndexesHow are stocks weighted?Price weighted (DJIA)Market-value weighted (SP500, NASDAQ)Equally weighte