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课程说明课程说明• 课程简介课程简介• 课程目标课程目标
课程简介课程简介 本课程主要介绍金融市场基本工具、金融市场本课程主要介绍金融市场基本工具、金融市场
理论、金融投资理论的基本概念和基本原理、理论、金融投资理论的基本概念和基本原理、基本方法与技术，使学生具有对一般证券的投基本方法与技术，使学生具有对一般证券的投资分析能力。资分析能力。
课程目标课程目标– 掌握投资环境的具体内容、投资过程的步骤和证券市场构成；掌握投资环境的具体内容、投资过程的步骤和证券市场构成；– 掌握资本资产定价模型的假设条件、套利原理、套利组合的构建掌握资本资产定价模型的假设条件、套利原理、套利组合的构建
以及套利的价格效应，掌握对以及套利的价格效应，掌握对 APTAPT 定价方法的解释；定价方法的解释；– 了解有效市场的投资策略、无效市场的投资策略以及技术分析方了解有效市场的投资策略、无效市场的投资策略以及技术分析方
法，掌握共同基金投资的特点；法，掌握共同基金投资的特点；– 掌握债券的定价理论、久期的含义及计算、免疫资产的含义及构掌握债券的定价理论、久期的含义及计算、免疫资产的含义及构
造、免疫资产存在的问题，掌握普通股定价模型；造、免疫资产存在的问题，掌握普通股定价模型；– 掌握期货合约的内容、期货结算所的各项规定、期货价格与预期掌握期货合约的内容、期货结算所的各项规定、期货价格与预期
现货价格的关系，期货价格与现货当前价格的关系；现货价格的关系，期货价格与现货当前价格的关系；– 掌握期权合约的类型、保证金的要求及计算，掌握期权价格的构掌握期权合约的类型、保证金的要求及计算，掌握期权价格的构
成，期权定价模型；成，期权定价模型；– 掌握金融工程的策略和互换，了解近期金融工程的创新。掌握金融工程的策略和互换，了解近期金融工程的创新。
主要参考书主要参考书– Zvi Bodie, Alex Kane, Alan J. Marcus, Zvi Bodie, Alex Kane, Alan J. Marcus,
Investments, 6th edition, china machine Investments, 6th edition, china machine presspress
– 博迪等，投资学（机械工业出版社）博迪等，投资学（机械工业出版社）
课程说明课程说明• 基本要求基本要求
– 不无故迟到、早退或者缺课不无故迟到、早退或者缺课– 不扰乱课堂秩序不扰乱课堂秩序– 按时完成作业按时完成作业
• 评估方法评估方法– 平时成绩平时成绩 (( 作业和出勤作业和出勤 ):30%):30%– 期末闭卷考试：期末闭卷考试： 70%70%
• 联系方式联系方式– Office: A1007Office: A1007– Phone: 15910878302Phone: 15910878302– Email: Email: [email protected]/[email protected]/[email protected]
CHAPTER 1CHAPTER 1 Investments Investments BackgroundBackground
CONTENTCONTENT
1.1 Real Assets versus Financial Assets
1.2 Financial Markets and the Economy
1.3 Clients of the Financial System
1.4 The Environment Responds to Clientele Demands
1.5 Recent Trends
1.1 Real Assets versus Financial Assets
• Real assetsReal assets– Assets used to produce goods and servicesAssets used to produce goods and services
• Land, building, knowledge, machine, workersLand, building, knowledge, machine, workers• Represent material wealth of a societyRepresent material wealth of a society
• Financial AssetsFinancial Assets– Claims on real assetsClaims on real assets
• Stocks and bondsStocks and bonds• Allow for separation of ownership and Allow for separation of ownership and
management of the firmmanagement of the firm• Means for individuals to hold their claims Means for individuals to hold their claims
on real assetson real assets• Facilitate the transfer of funds to Facilitate the transfer of funds to
enterprises with attractive investment enterprises with attractive investment opportunities opportunities
• Indirectly contribute to the productive Indirectly contribute to the productive capacity of the economycapacity of the economy
Financial Versus Real Financial Versus Real AssetsAssets
Financial Versus Real Financial Versus Real AssetsAssets
• Financial Assets-Financial Assets-Claims on real Claims on real assetsassets– Income generated by real assets is Income generated by real assets is
allocated to investors according to allocated to investors according to their ownership of the financial their ownership of the financial assets.assets.• BondholdersBondholders• EquityholdersEquityholders
Financial Versus Real Financial Versus Real AssetsAssets
• Essential nature of investment Essential nature of investment – Reduced current consumptionReduced current consumption– Planned later consumptionPlanned later consumption– To hold financial assets (invest for the To hold financial assets (invest for the
future)future)
Financial Versus Real Financial Versus Real AssetsAssets
• Differences:Differences:– Real assets produce goods and servicesReal assets produce goods and services– Financial assets define the allocation of Financial assets define the allocation of
income or wealth among investorsincome or wealth among investors
• DistinguishDistinguish– Appearance on Balance SheetAppearance on Balance Sheet– DestroyDestroy
• Financial assets are created and destroyed in Financial assets are created and destroyed in ordinary course of doing businessordinary course of doing business
• Real assets are destroyed by accident or by wearing Real assets are destroyed by accident or by wearing out over time out over time
Financial Versus Real Financial Versus Real AssetsAssets
Table 1.1. Balance Sheet – U.S. Households, 2006
Table 1.2 Domestic Net Worth, 2006
1.2 Financial Markets
and the Economy
Financial Markets
• Consumption TimingConsumption Timing• Allocation of RiskAllocation of Risk• Separation of Ownership and Separation of Ownership and
ManagementManagement
Financial Markets
• Consumption TimingConsumption Timing– Shift purchasing power from high-Shift purchasing power from high-
earnings periods to low-earnings earnings periods to low-earnings periodsperiods• Store savings in financial assetsStore savings in financial assets• Sell financial assets to provide funds when Sell financial assets to provide funds when
neededneeded
Financial Markets
• Allocation of RiskAllocation of Risk– Investors can self-select into security Investors can self-select into security
types with risk-return characteristics types with risk-return characteristics that best suit their preferencesthat best suit their preferences• Invest in a plant: stock or bond?Invest in a plant: stock or bond?
– Each security can be sold for the best Each security can be sold for the best possible pricepossible price
Financial Markets
• Separation of Ownership and Separation of Ownership and ManagementManagement– Group of stockholders canGroup of stockholders can’’t participate in t participate in
day-to-day managementday-to-day management• Elect a board of directors, hire and supervise Elect a board of directors, hire and supervise
the managementthe management
– Agency problemsAgency problems•The potential conflicts of interest The potential conflicts of interest that the managers may be tempted that the managers may be tempted to engage in activities not in the to engage in activities not in the best interest of the shareholders.best interest of the shareholders.
1.3 Clients of the financial system
The Clients
• Business Firms Business Firms –– net borrowers net borrowers• Households Households –– net savers net savers• Governments Governments –– can be both borrowers can be both borrowers
and saversand savers
• How to invest moneyHow to invest moneyInterested in a wide array of assets Interested in a wide array of assets
depending on their economic situationdepending on their economic situation
– TaxTax: different tax brackets: different tax brackets– RiskRisk::
•risk tolerancerisk tolerance•hedging demandhedging demand•diversificationdiversification
The Clients- The household The household sectorsector
• How to raise money to finance How to raise money to finance their investments in real their investments in real assetsassets– Borrow from banks or issue bonds Borrow from banks or issue bonds – Issue stocksIssue stocks
• Get the best priceGet the best price• At the lowest costAt the lowest cost
The Clients- Business Business FirmsFirms
Table 1.4 Balance Sheet of Table 1.4 Balance Sheet of Nonfinancial U.S. BusinessNonfinancial U.S. Business
• Raise money to finance their Raise money to finance their expenditures by borrowingexpenditures by borrowing– No stock issueNo stock issue– Treasury bonds/Treasury billsTreasury bonds/Treasury bills
• special advantagespecial advantage– CreditworthyCreditworthy– At lowest rateAt lowest rate
• Regulate the financial environmentRegulate the financial environment
The Clients- GovernmentsGovernments
1.4 The environment responds to clientele demands
The environment responds The environment responds to clientele demandsto clientele demands
• When clients demand, the profit-When clients demand, the profit-seeking suppliers provide service with seeking suppliers provide service with charge, leading to diversity of charge, leading to diversity of financial marketsfinancial markets
• Financial IntermediariesFinancial Intermediaries– BanksBanks– Investment companiesInvestment companies– Insurance companiesInsurance companies– Credit unionsCredit unions
• Investment BankersInvestment Bankers
• Sell their own liabilities to raise Sell their own liabilities to raise funds that are used to purchase funds that are used to purchase liabilities of other corporationsliabilities of other corporations
• Banks, investment companies, Banks, investment companies, insurance companies, credit insurance companies, credit unionsunions
Financial IntermediariesFinancial Intermediaries
• BanksBanks– What banks do?What banks do?
•Raise funds (deposit)Raise funds (deposit)•Lend to other borrowers (loan)Lend to other borrowers (loan)
– What service banks provide ?What service banks provide ?•Convenience and cost saving Convenience and cost saving
(problem of coordination)(problem of coordination)– What profit banks get ?What profit banks get ?
•Interest SpreadInterest Spread
Financial IntermediariesFinancial Intermediaries
• Assets and liabilities are Assets and liabilities are overwhelmingly financialoverwhelmingly financial– To channel household savings to To channel household savings to
business sectorbusiness sector
• Pool small /lend to largePool small /lend to large• DiversificationDiversification• ExpertiseExpertise
Financial IntermediariesFinancial Intermediaries
Table 1.3 Balance Sheet of Table 1.3 Balance Sheet of Commercial BanksCommercial Banks
• Investment companies- mutual Investment companies- mutual fundfund– What they do?What they do?
•Pool money Pool money •Large-scale tradingLarge-scale trading
– What service they provide ?What service they provide ?•As an investment agent, convenience, As an investment agent, convenience,
cost saving, specializationcost saving, specialization– What profit they get ?What profit they get ?
•Management feeManagement fee
Financial IntermediariesFinancial Intermediaries
• Services to firmsServices to firms– Advise the issuing firm on prices, Advise the issuing firm on prices,
market conditions, appropriate interest market conditions, appropriate interest rate, etcrate, etc
– Handle the marketing of the security Handle the marketing of the security issue to the publicissue to the public
– Importance of their reputationImportance of their reputation
Investment bankingInvestment banking
Financial Innovation and Financial Innovation and DerivativesDerivatives
• Responses to perceived Responses to perceived profit profit opportunitiesopportunities created by as-yet created by as-yet unsatisfied demandsunsatisfied demands for securities for securities with particular risk, return, tax and with particular risk, return, tax and timing attributestiming attributes
• Innovative security designInnovative security design– Securitization of Mortgages: GNMA Securitization of Mortgages: GNMA
pass-through securitypass-through security– Derivative securities /Primitive securityDerivative securities /Primitive security
Financial Innovation and Financial Innovation and DerivativesDerivatives
• Primitive securityPrimitive security– Offer returns based only on the status of Offer returns based only on the status of
the issuerthe issuer• Bond: on the solvency of the issuing firmBond: on the solvency of the issuing firm• Stock: firmStock: firm’’s financial positions financial position
• Derivative securitiesDerivative securities– yield returns depending on additional yield returns depending on additional
factors pertaining to the prices of other factors pertaining to the prices of other assetsassets• Stock option: on price of the underlying stockStock option: on price of the underlying stock
Responses to taxation and Responses to taxation and regulationregulation
• Examples:Examples:– Regulation QRegulation Q——Eurodollar marketEurodollar market– Tax avoidance Tax avoidance –– Zero-Coupon bond Zero-Coupon bond
1.5 The Investment Process
Investment ProcessInvestment Process
• Saving - insured bank accountSaving - insured bank account• Investing - choose what assets to holdInvesting - choose what assets to hold• An investor’s portfolioAn investor’s portfolio
– Collection of investment assetsCollection of investment assets
• Top-down portfolio constructionTop-down portfolio constructionTwo types of decisions to construct portfolioTwo types of decisions to construct portfolio– Asset allocationAsset allocation– Security selectionSecurity selection
• Security analysisSecurity analysis
1.6 Markets and
Market Structure
Markets and Market Structure
• Direct search marketDirect search market– Sporadic, low-priced, nonstandard goodsSporadic, low-priced, nonstandard goods– Example, used goodsExample, used goods
• Brokered marketBrokered market– Offer search service to buyers and sellersOffer search service to buyers and sellers– Example, real estate marketExample, real estate market– Primary market, investment bankers act as Primary market, investment bankers act as
brokersbrokers– Block transactions, brokers or block houses Block transactions, brokers or block houses
search directly for other large traderssearch directly for other large traders
Markets and Market Structure
• Dealer marketsDealer markets– Dealers specialize in various assets, Dealers specialize in various assets,
trade assets for their own accountstrade assets for their own accounts– Profit is bid-ask spreadProfit is bid-ask spread
• Auction marketAuction market– All transactors in a good converge at All transactors in a good converge at
one place to bid on or offer a goodone place to bid on or offer a good
1.7 RECENT TRENDS
Globalization
• Managing foreign exchangeManaging foreign exchange• Diversification to improve Diversification to improve
performanceperformance• Instruments and vehicles continue to Instruments and vehicles continue to
develop (WEBs)develop (WEBs)• Information and analysis improvesInformation and analysis improves
Globalization
• Ways of foreign investment (U.S)Ways of foreign investment (U.S)– ADR (American Depository Receipts)ADR (American Depository Receipts)
• Represent claims to shares of foreign stocksRepresent claims to shares of foreign stocks
– Purchase foreign securities offered in dollarPurchase foreign securities offered in dollar– Buy mutual funds that invest internationallyBuy mutual funds that invest internationally– Buy derivatives that depend on foreign Buy derivatives that depend on foreign
securitiessecurities– WEBS (world equity benchmark shares)WEBS (world equity benchmark shares)
• Trade portfolios of foreign stocks in a selected Trade portfolios of foreign stocks in a selected country, tracking the performance of an index for country, tracking the performance of an index for that countrythat country
Securitization
• Allow borrowers to enter capital Allow borrowers to enter capital markets directly, pools of loans markets directly, pools of loans are aggregated into pass-through are aggregated into pass-through securitiessecurities
Figure 1.2 Asset-backed Securities Outstanding
Financial Engineering•Use of Use of mathematical models and mathematical models and computer-based trading technology computer-based trading technology to to synthesize new financial productssynthesize new financial products
•Repackaging Services of Financial Repackaging Services of Financial IntermediariesIntermediaries
•Bundling and unbundling of cash flowsBundling and unbundling of cash flows•Examples: strips, CMOs, dual purpose Examples: strips, CMOs, dual purpose funds, principal/interest splitsfunds, principal/interest splits
Unbundling – Mortgage Security
Computer Networks
• Online tradingOnline trading• Information made cheaply and Information made cheaply and
widely availablewidely available• Direct trading among investorsDirect trading among investors
CHAPTER 2CHAPTER 2 Financial MarketFinancial Market
andand Financial Financial InstrumentsInstruments
Financial MarketFinancial Market
• Money MarketMoney Market– Short-term, marketable, liquid, low-risk Short-term, marketable, liquid, low-risk
debt securitiesdebt securities
• Capital Market Capital Market –– longer-term riskier longer-term riskier securitiessecurities– Bond MarketBond Market– Equity MarketEquity Market– Derivative MarketDerivative Market
2.1 MONEY MARKET
Money MarketMoney Market
• Treasury Bills: government issueTreasury Bills: government issue• Certificates of Deposit (CD): time depositCertificates of Deposit (CD): time deposit• Commercial Paper: short-term unsecuredCommercial Paper: short-term unsecured• BankerBanker’’s Acceptance: order to a bank to pays Acceptance: order to a bank to pay• Eurodollar: dollar denominated deposits at Eurodollar: dollar denominated deposits at
foreign banksforeign banks• Repos and Reverses: Repos and Reverses:
agreementagreement ，， government securities, sell government securities, sell and buy back overnightand buy back overnight
Money MarketMoney Market
• Federal Funds: funds in the bank’s Federal Funds: funds in the bank’s reserve account, overnight, federal funds reserve account, overnight, federal funds raterate
• LIBOR market: London interbank Offered LIBOR market: London interbank Offered Rate, lend money among banksRate, lend money among banks
• SHIBORSHIBOR
T-BillT-Bill
• Government borrowing, highly liquid Government borrowing, highly liquid (Easily converted to cash)(Easily converted to cash)
• Buy at discount, sell at face value at Buy at discount, sell at face value at maturitymaturity– Bid priceBid price– Asked priceAsked price– Bid-ask spreadBid-ask spread
• Bank-discount methodBank-discount method– Annualized based on a 360-day yearAnnualized based on a 360-day year
T-BillT-Bill
T-Bill T-Bill 贴现国债贴现国债
Commercial Paper –Commercial Paper – 短期短期融资券融资券
央行票据央行票据
报价报价
回购报价回购报价
附息国债附息国债
2.2 BOND MARKET
Bond Market
• Treasury Notes and BondsTreasury Notes and Bonds• Federal Agency DebtFederal Agency Debt• International BondsInternational Bonds• Inflation-Protected BondsInflation-Protected Bonds• Municipal BondsMunicipal Bonds• Corporate BondsCorporate Bonds• Mortgages and Mortgage-Backed Mortgages and Mortgage-Backed
SecuritiesSecurities
Treasury Notes and Bonds
• MaturitiesMaturities– Notes Notes –– maturities up to 10 years maturities up to 10 years– Bonds Bonds –– maturities in excess of 10 years maturities in excess of 10 years
• Par Value - $1,000Par Value - $1,000• Coupon payment, semiannual Coupon payment, semiannual
interest paymentinterest payment• Quotes Quotes –– percentage of par percentage of par
Figure 2.4 Treasury Notes Figure 2.4 Treasury Notes and Bondsand Bonds
Federal Agency Debt
• The government agencies The government agencies – Borrows money by issuing securities Borrows money by issuing securities – Lend money to institutions to be lent to individualsLend money to institutions to be lent to individuals
• Major issuersMajor issuers– Federal Home Loan Bank(Federal Home Loan Bank( 联邦住宅贷款银行联邦住宅贷款银行 ))– Federal National Mortgage AssociationFederal National Mortgage Association ，， Fannie Mae Fannie Mae
• 联邦国民抵押贷款协会，联邦国民抵押贷款协会，““房利美房利美”” , federally sponsored, federally sponsored
– Government National Mortgage AssociationGovernment National Mortgage Association ， ， Ginnie Ginnie Mae Mae • 政府国民抵押贷款协会，政府国民抵押贷款协会，““吉利美吉利美”” , government-owned, government-owned
– Federal Home Loan Mortgage CorporationFederal Home Loan Mortgage Corporation ，， Freddie Freddie MAC MAC • 联邦住宅抵押贷款公司，联邦住宅抵押贷款公司，““房地美房地美”” ,federally sponsored,federally sponsored
Inflation-Protected Inflation-Protected BondsBonds
• Bond linked to an index of the cost Bond linked to an index of the cost of livingof living– Way to hedge inflation riskWay to hedge inflation risk
• TIPS (treasury inflation-protected TIPS (treasury inflation-protected securities)securities)– Principal amount is adjusted in Principal amount is adjusted in
proportion to increases in the CPIproportion to increases in the CPI
Municipal BondsMunicipal Bonds
• Issued by state and local governmentsIssued by state and local governments• Interest income is exempt from federal Interest income is exempt from federal
income taxation/state/local taxationincome taxation/state/local taxation• TypesTypes
– General obligation bondsGeneral obligation bonds– Revenue bondsRevenue bonds
• Industrial revenue bondsIndustrial revenue bonds
• Maturities Maturities –– range up to 30 years range up to 30 years
Figure 2.5 Outstanding Tax-exempt Debt
Municipal Bond Yields
• Interest income on municipal bonds is not Interest income on municipal bonds is not subject to federal and sometimes state subject to federal and sometimes state and local taxand local tax
• To compare yields on taxable securities a To compare yields on taxable securities a Taxable Taxable Equivalent Yield Equivalent Yield is constructedis constructed
•R(1-T)=RmR(1-T)=Rm– Example: tax bracket is 30%, would you Example: tax bracket is 30%, would you
prefer to earn a 6% taxable return or a 4% tax-prefer to earn a 6% taxable return or a 4% tax-free return? What is the equivalent taxable free return? What is the equivalent taxable yield of the 4% tax-free yieldyield of the 4% tax-free yield
Corporate Bonds
• Issued by private firms Issued by private firms • Semi-annual interest paymentsSemi-annual interest payments• Subject to larger default risk than Subject to larger default risk than
government securitiesgovernment securities• Options in corporate bondsOptions in corporate bonds
– CallableCallable– ConvertibleConvertible
• Developed in the 1970s to help Developed in the 1970s to help liquidity of financial institutionsliquidity of financial institutions
• Proportional ownership of a pool or Proportional ownership of a pool or a specified obligation secured by a a specified obligation secured by a pool pool
• Market has experienced very high Market has experienced very high rates of growthrates of growth
Mortgages and Mortgage-backed Securities
• What is the lenders’ difficulties led What is the lenders’ difficulties led by fixed-rate mortagesby fixed-rate mortages– Interest rate riskInterest rate risk
• Short-term liabilities, while long-term assetsShort-term liabilities, while long-term assets• Suffer losses when interest rates increasedSuffer losses when interest rates increased
• Adjustable-rate mortgageAdjustable-rate mortgage• Mortgage-backed securityMortgage-backed security
– Securitization of mortgage loansSecuritization of mortgage loans
Mortgages and Mortgage-backed Securities
Figure 2.8 Mortgage-Backed Figure 2.8 Mortgage-Backed Securities OutstandingSecurities Outstanding
2.3 EQUITY MARKET
Equity MarketEquity Market
• Common Stock Common Stock – Represent ownership shares in a Represent ownership shares in a
corporationcorporation• VoteVote• Financial benefitFinancial benefit
– CharacteristicsCharacteristics• Residual claim: last in line to have claim on Residual claim: last in line to have claim on
the assets and income of the corporationthe assets and income of the corporation• Limited liabilitiesLimited liabilities
• Example: Example: – if you buy 100 shares of IBM, what are if you buy 100 shares of IBM, what are
you entitled? What is the most money you entitled? What is the most money you can make over the next year? If you you can make over the next year? If you pay $50 per share, what is the most pay $50 per share, what is the most money you could lose over the next money you could lose over the next year?year?
Equity MarketEquity Market
Equity MarketEquity Market
• Board of directorsBoard of directors– Elected by the shareholdersElected by the shareholders– Meet a few times each yearMeet a few times each year– Select managers who actually run the Select managers who actually run the
corporationcorporation• Managers’ authorityManagers’ authority
• Vote by proxyVote by proxy• Mechanisms to alleviate agency problemsMechanisms to alleviate agency problems
– Compensation schemes, oversight by outsiders, Compensation schemes, oversight by outsiders, threat of proxy contest, threat of takeoverthreat of proxy contest, threat of takeover
Equity MarketEquity Market
• Preferred StockPreferred Stock– Fixed amount of income each yearFixed amount of income each year– Not convey voting powerNot convey voting power– Preferred dividend cumulativePreferred dividend cumulative– Not tax-deductibleNot tax-deductible– Ranks after bondsRanks after bonds
2.4 STOCK INDEXES
• RepresentativeRepresentative• How is it weightedHow is it weighted
– Price weighted (DJIA)Price weighted (DJIA)– Market value weighted (S&P 500, Market value weighted (S&P 500,
NASDAQ)NASDAQ)– Equal (Value Line Index)Equal (Value Line Index)
Stock IndexesStock Indexes
Stock IndexesStock Indexes
• Price-weighted average indexPrice-weighted average index• Dow Jones Industrial Average (DJIA)Dow Jones Industrial Average (DJIA)
– 30 large, blue-chip, simple average30 large, blue-chip, simple average– measures the return on a portfolio that holds measures the return on a portfolio that holds
one share of each stockone share of each stock• Market-value-weighted indexMarket-value-weighted index• Standard & PoorStandard & Poor’’s Indexess Indexes 500500
– measures the return holding a portfolio of all measures the return holding a portfolio of all 500 firms in the index 500 firms in the index in proportion to their in proportion to their market valuesmarket values
• Offer ways of Offer ways of comparing performancecomparing performance of managersof managers• Base of derivativesBase of derivatives
DJIA Price-Weighted AverageDJIA Price-Weighted Average
• Compute the return of the portfolio using price-weighted average Compute the return of the portfolio using price-weighted average Initial portfolio value =$25 + $100 = $125; Final value =$30 + $ 90 Initial portfolio value =$25 + $100 = $125; Final value =$30 + $ 90
= $120= $120Percentage change in portfolio value =-5/125=-0.4%Percentage change in portfolio value =-5/125=-0.4%
• Compute the return of the index using price-weighted averageCompute the return of the index using price-weighted averageInitial index value = (25 + 100)/2 = 62.5; Final index value = (30 Initial index value = (25 + 100)/2 = 62.5; Final index value = (30
+ 90)/2 = 60+ 90)/2 = 60Percentage change in index =-2.5/62.5 = -.04 = -4%Percentage change in index =-2.5/62.5 = -.04 = -4%
• If the XYZ split 2 for 1 ? To keep the initial index unchanged, calculate If the XYZ split 2 for 1 ? To keep the initial index unchanged, calculate the new divisorthe new divisor
• Suppose XYZ : split two for oneSuppose XYZ : split two for one– Initial price: 25, 100/2=50 Initial price: 25, 100/2=50 (50+25)/2=37.5<62.5• The divisor (d) must be reduced to a The divisor (d) must be reduced to a
value that leaves the average unaffectedvalue that leaves the average unaffected– (50+25)/d=62.5(50+25)/d=62.5– d=1.2d=1.2
– Final price: 30, 90/2=45 Final price: 30, 90/2=45 – Final index: (30+45)/1.2=62.5Final index: (30+45)/1.2=62.5
DJIA Price-Weighted DJIA Price-Weighted Average Average
S&PS&P’’s Composite 500s Composite 500 Market Value-Weighted Index Market Value-Weighted Index
• ABC would have five times the weight given to XYZABC would have five times the weight given to XYZInitial value =Initial value = $25×20 + $100×1 = $600$25×20 + $100×1 = $600Final value =Final value = $30 ×20+ $ 90×1 = $690$30 ×20+ $ 90×1 = $690Percentage change in portfolio value =690/600=1.15Percentage change in portfolio value =690/600=1.15Assume: Initial index value = 100Assume: Initial index value = 100Final index value = 100*1.15=115Final index value = 100*1.15=115
Figure 2-10 Comparative Performance of Several Stock
Market Indexes
2.5 DERIVATIVE MARKETS
• Derivative Assets or Contingent Derivative Assets or Contingent ClaimsClaims– The instruments provide payoffs The instruments provide payoffs
that depend on the values of other that depend on the values of other assets such as commodity prices, assets such as commodity prices, bond and stock prices, or market bond and stock prices, or market index valuesindex values
Derivative Securities
Derivative Securities
OptionsOptions• Basic PositionsBasic Positions
– Call (Buy)Call (Buy)– Put (Sell)Put (Sell)
• TermsTerms– Exercise Exercise
Price/quantityPrice/quantity– Expiration DateExpiration Date– AssetsAssets
Futures Futures • Basic PositionsBasic Positions
– Long (Buy)Long (Buy)– Short (Sell)Short (Sell)
• TermsTerms– Delivery DateDelivery Date– Price/quantityPrice/quantity– AssetsAssets
•
央行票据央行票据
附息国债附息国债
企业债企业债
金融债金融债
homeworkhomework
• 11 、请给出我国上海证券交易所综合指数、请给出我国上海证券交易所综合指数（沪指）和深圳证券交易所综合指数（深（沪指）和深圳证券交易所综合指数（深指）的计算方式，并说明他们是价格加权指）的计算方式，并说明他们是价格加权平均指数还是价值加权平均指数平均指数还是价值加权平均指数
• 2 2 习题习题
