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Introduction to International Capital Markets Products, Strategies, Participants

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ISBN-10: 0470758988

ISBN-13: 9780470758984

Edition: 2nd 2008

Authors: Andrew M. Chisholm, Chisholm

List price: $111.95
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Book details

List price: $111.95
Edition: 2nd
Copyright year: 2008
Publisher: John Wiley & Sons, Limited
Publication date: 5/22/2009
Binding: Hardcover
Pages: 448
Size: 6.75" wide x 10.25" long x 1.25" tall
Weight: 0.880
Language: English

Mike Gane is Professor of Sociology at University of LoughboroughANDREW M. CHISHOLM has designed, developed and taught programmes in financial markets since 1984. In that time he has worked with many of the largest financial institutions around the world, teaching traders, marketing staff, risk managers, analysts, fund managers, operations and technology professionals. He has worked extensively on training programmes designed to introduce new graduate and MBA entrants to the securities industry. He was formerly head of professional development for Europe at JP Morgan.

Acknowledgment
Introduction: The Market Context
Capital and the Capital Markets
The Euromarkets (International Capital Markets)
Modern Investment Banking
The Clients of Investment Banks
About this Book
The Money Markets
Chapter Overview
Domestic Money Markets
US Domestic Markets
The European Central Bank (ECB)
Sterling Money Markets
The Bank of Japan
Systemic Risks and Moral Hazards
Treasury Bills
Discounting Treasury Bills
US Commercial Paper
Credit Risk on USCP
Bankers� Acceptances
The Eurocurrency Markets
Eurocurrency Loans and Deposits
Eurocurrency Interest and Day-Count
Eurocurrency Certificates of Deposit
CD Yield-to-Maturity
Euro-Commercial Paper
Repos and Reverses
Repo: Case Study
Other Features of Repos
Chapter Summary
The Foreign Exchange Market
Chapter Overview
Market Structure
FX Dealers and Brokers
Spot Foreign Exchange Deals
Sterling and Euro Quotations
Factors Affecting Spot FX Rates
Spot FX Trading
Spot Position Keeping
FX Risk Control
Cross-Currency Rates
Outright Forward FX Rates
Outright Forward FX Hedge: Case Study
Forward FX Formula
FX or Forward Swaps
FX Swap Two-Way Quotations
Chapter Summary
Major Government Bond Markets
Chapter Overview
Introduction to Government Bonds
Sovereign Risk
US Government Notes and Bonds
US Treasury Quotations
US Treasury Strips
Bond Pricing
Pricing Coupon Bonds: Examples
Detailed Bond Valuation: US Treasury
Bond Yield
Reinvestment Assumptions
Annual and Semi-Annual Bond Yields
UK Government Bonds
Japanese Government Bonds (JGBs)
Eurozone Government Bonds
Chapter Summary
Bond Price Sensitivity
Chapter Overview
Bond Market Laws
Other Factors Affecting Price Sensitivity
Macaulay�s Duration
Calculating Macaulay�s Duration
Duration of a Zero
Modified Duration
Price Value of a Basis Point
Convexity
Measuring Convexity
Convexity Behaviour
Portfolio Duration
Dedication
Immunization
Duration-Based Hedges
Convexity Effects on Duration Hedges
Chapter Summary
The Yield Curve
Chapter Overview
Real and Nominal Interest Rates
Compounding Periods
The Yield Curve Defined
Theories of Yield Curves
Zero Coupon or Spot Rates
Bootstrapping
Spot Rates and the Par Curve
Pricing Models Using Spot Rates
Forward Rates
Discount Factors
Chapter Summary
Credit Spreads and Securitization
Chapter Overview
Basics of Credit Spreads
The Role of the Ratings Agencies
Credit Spreads and Default Probabilities
Credit Default Swaps
Index Credit Default Swaps
Basket Default Swaps
Credit-Linked Notes
Securitization and CDOs
Rationale for Securitization
Synthetic CDOs
Chapter Summary
Equity Markets and Equity Investment
Chapter Overview
Comparing Corporate Debt and Equity
Additional Features of Common Stock
Hybrid Securities
Equity Investment Styles
Efficient Markets
Modern Portfolio Theory (MPT)
Primary Markets for Common Stock
Subsequent Common Stock Issues
Secondary Markets: Major Stock Markets
Depository Receipts
Stock Lending
Portfolio (Basket) Trading
Chapter Summary
Equity Fundamental Analysis
Chapter Overview
Principles of Common Stock Valuation
The Balance Sheet Equation
The Income Statement
Earnings Per Share (EPS)
Dividend Per Share (DPS)
Ratio Analysis
Liquidity Ratios
Profitability Ratios
Leverage Ratios
Investor Ratios and Valuation
Applying Valuation Multiples
Firm or Enterprise Value Multiples
Chapter Summary
Cash Flow Models in Equity Valuation
Chapter Overview
The Basic Dividend Discount Model
Constant Dividend Growth Models
The Implied Return on a Share
Dividend Yield and Dividend Growth
Price/Earnings Ratio
Stage Dividend Discount Models
Two-Stage Model: Example
The Capital Asset Pricing Model (CAPM)
Beta
Estimating the Market Risk Premium
The Equity Risk Premium Controversy
CAPM and Portfolio Theory
Free Cash Flow Valuation
Forecasting Free Cash Flows
Weighted Average Cost of Capital (WACC)
Residual Value
WACC and Leverage
Assets Beta Method
Company Value and Leverage
Chapter Summary
Interest Rate Forwards and Futures
Chapter Overview
Forward Rate Agreements (FRAs)
FRA Application: Case Study
Borrowing Costs with an FRA Hedge
FRA Market Quotations
The Forward Interest Rate
Financial Futures
CME Eurodollar Futures
Eurodollar Futures Quotations
Futures Margining
Margining Example: Euribor Futures on Eurex
Hedging with Interest Rate Futures: Case Study
Futures Strips
Chapter Summary
Appendix: Statistics on Derivatives Markets
Bond Futures
Chapter Overview
Definitions
The CBOT 30-Year US Treasury Bonds Futures
Invoice Amount and Conversion Factors
Long Gilt and Euro-Bund Futures
Forward Bond Price
Carry Cost
The Implied Repo Rate
The Cheapest to Deliver (CTD) Bond
CTD Behaviour
Hedging with Bond Futures
Basis Risk
Hedging Non-CTD Bonds
Using Futures in Portfolio Management
Chapter Summary
Interest Rate Swaps
Chapter Overview
Swap Definitions
The Basic Interest Rate Swap Illustrated
Typical Swap Applications
Interest Rate Swap: Detailed Case Study
Interest Rate Swap Terms
Comparative Advantage
Swap Quotations and Spreads
Determinants of Swap Spreads
Hedging Swaps with Treasuries
Cross-Currency Swaps: Case Study
Cross-Currency Swap Revaluation
Chapter Summary
Appendix: Swap Variants
Interest Rate Swap Valuation
Chapter Overview
Valuing a Swap at Inception
Valuing the Swap Components
Swap Revaluation
Revaluation Between Payment Dates
The Forward Rate Method
Forward Rate Method on a Spreadsheet
Swap Rates and LIBOR Rates
Pricing a Swap from Futures
Hedging Interest Rate Risk on Swaps
Chapter Summary
Equity Index Futures and Swaps
Chapter Overview
Index Futures
Margining Procedures
Final Settlement and Spread Trades
Hedging with Index Futures: Case Study
Hedge Efficiency
Other Uses of Index Futures
Pricing an Equity Forward Contract
Index Futures Fair Value
The Basis
Index Arbitrage Trade
Running an Arbitrage Desk
Features of Index Futures
Equity Swaps
Managing the Risks on Equity Swaps
Structuring Equity Swaps
Benefits and Applications of Equity Swaps
Chapter Summary
Fundamentals of Options
Chapter Overview
Definitions
Basic Option Trading Strategies
Long Call: Expiry Payoff Profile
Short Call: Expiry Payoff Profile
Long Put: Expiry Payoff Profile
Short Put: Expiry Payoff Profile
Summary: Intrinsic and Time Value
CBOE Stock Options
CME S&P 500 Index Options
Stock Options on LIFFE
FT-SE 100 Index Options
Chapter Summary
Appendix: Exotic Options
Option Valuation Models
Chapter Overview
Fundamental Principles: European Options
Synthetic Forwards and Futures
American Options and Early Exercise
Binomial Trees
Expanding the Tree
Black-Scholes Model
Black-Scholes Assumptions
Chapter Summary
Appendix: Measuring Historic Volatility
Option Pricing and Risks
Chapter Overview
Intrinsic and Time Value Behaviour
Volatility Assumption and Option Pricing
DELTA (?OR ?)
Delta Behaviour
GAMMA (?OR ?)
Readjusting the Delta Hedge
Gamma Behaviour
THETA (?)
Vega
Rho (p) and Summary of Greeks
Chapter Summary
Appendix: Delta and Gamma Hedging
Option Strategies
Chapter Overview
Hedging with Put Options
Covered Call Writing
Collars
Bull and Bear Spreads
Other Spread Trades
Volatility Revisited
Volatility Trading: Straddles and Strangles
Current Payoff Profiles
Profits and Risks on Straddles
Chapter Summary
Additional Option Applications
Chapter Overview
OTC and Exchange-traded Currency Options
Hedging FX Exposures with Options: Case Study
Pricing Currency Options
Interest Rate Options
Exchange-Traded Interest Rate Options
Caps, Floors, and Collars
Interest Rate Cap: Case Study
Pricing Caps and Floors: Black Model
Swaptions
Interest Rate Strategies
Convertible Bonds
CB Measures of Value
Conversion Premium and Parity
Convertible Arbitrage
Chapter Summary
Glossary of Financial Terms
Index