Normal view MARC view

Finance and financial markets

Author: Pilbeam, Keith Publisher: Palgrave, 1998.Language: EnglishDescription: 390 p. ; 23 cm.ISBN: 0333629450Type of document: BookBibliography/Index: Includes index
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Book Asia Campus
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Print HG173 .P55 1998
(Browse shelf)
900094768
Available 900094768
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Includes index

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Finance and financial markets List of Figures xvi xviii XX Ls of Tables it Preface Acknowledgements xxii 1 The World of Finance Introduction Financial centres The role of a financial centre Services of a financial centre The growth of the financial services industry The globalization of financial markets Technology Deregulation Financial innovation Types of financial innovations Emerging markets Problems concerning investment in emerging markets The future Conclusions 2 Financial Intermediation and Financial Markets Introduction Surplus and deficit agents What is a financial security? Types of financial claims: debt and equity The role of financial intermediaries Provision of a payments mechanism Maturity transformation Risk transformation Liquidity provision Reduction of contracting, search and information costs Types of financial markets The classification of financial markets 2.13 2.14 2.15 3 The role played by financial markets Participants in financial markets Conclusions Financial Institutions Introduction The central bank The implementation of monetary policy The management of the National Debt Supervisory function Types of financial intermediaries Deposit institutions The banking sector Savings institutions Insurance companies The phenomenon of Bancassurance Mutual funds or unit trusts Investment companies and investment trusts Pension funds Specialist financial institutions Venture capital companies Finance companies or finance houses Factoring agencies The role of financial institutions Conclusions Monetary Policy and Interest Rate Determination Introduction The functions of money Bills and bonds The operation of monetary policy The narrow and broad money supply The commercial banking system and the money supply Formula for the money multiplier Controlling the money supply The determination of interest rates The loanable funds approach to interest rate determination Money market or loanable funds theory? Inflation and interest rates Fiscal policy and interest rates Other factors influencing the interest rate Theories of the yield curve 4 4.16 4.17 4.18 4.19 4.20 4.21 4.22 The expectations theory Liquidity preference theory Preferred habitat theory Market segmentation theory The importance of alternative views of the term structure Problems with monetary policy Conclusions 5 The Domestic and International Money Markets Introduction Types of domestic money market instruments Treasury bills Commercial paper The interbank market Banker's acceptances Repurchase agreements Certificates of deposit The international money market Euromarkets The origins and development of the Euromarkets The characteristics of the Eurodollar market The competitive advantage of Eurobanks The coexistence of domestic and Eurobanking The creation of Eurodeposits The pros and cons of the Eurocurrency markets Syndicated loans Euronotes Conclusions 6 The Domestic and International Bond Market Introduction Trading in government bonds Determining the price of government bonds Clean and dirty bond prices The current yield The simple yield to maturity Yield to maturity The par value relation Bond price volatility Duration Modified duration The usefulness of the duration measure Yield curves Corporate bonds Credit ratings Risks associated with corporate bonds Financial innovation and corporate bonds Convertible and exchangeable bonds Bonds with warrants Putable bond Floating rate notes Junk bonds Medium-term notes The international capital market Motivations behind international capital flows The origins and development of the Eurobond market Typical features of a Eurobond Control and regulation of the Eurobond market The management of a Eurobond issue Innovations in the Eurobond market Conclusions 7 Portfolio Analysis: Risk and Return in Financial Markets Introduction Determining the price of a financial asset Return on a security The variance and standard deviation of rate of return Risk on a security Covariance and correlation of rates of return Different types of investors The indifference curves of risk-averse investors Portfolio theory Reducing risk through diversification Measuring risk on a portfolio The two-asset efficiency frontier The portfolio efficiency frontier Market risk and specific risk The efficient set with a riskless security The market portfolio The market price of risk Measuring the market index Conclusions 8 The Capital Asset Pricing Model Introduction The market model Portfolio risk and return using the market model The capital asset pricing model Assumptions of the CAPM The theory behind the CAPM Expressing the CAPM in risk premium form The securities market line The CAPM in action - measuring the beta coefficient Empirical testing of the CAPM The empirical evidence on the CAPM The multifactor CAPM The arbitrage pricing theory Conclusions 9 Stockmarkets and Equities 9.1 Introduction 9.2 The major international stockmarkets 9.3 Stock market participants 9.4 The primary and secondary market 9.5 Different types of equity 9.6 The buying and selling of shares 9.7 A rights issue 9.8 A simple model of the pricing of a rights issue 9.9 Does the performance of the stock market matter? 9.10 The pricing of equities 9.1 1 The dividend pricing approach 9.12 The Gordon growth model 9.13 The dividend irrelevance theorem 9.14 Measurement of the required rate of return 9.15 The subjectivity of share pricing 9.16 Forecasting future dividends 9.17 Debt or equity finance? 9.18 Financial ratio analysis 9.19 The use of financial ratios 9.20 Problems with financial ratios 9.21 Conclusions 10 The Efficiency of Financial Markets 10.1 Introduction 10.2 Three levels of efficiency The efficient market hypothesis and a random walk Implications of various forms of efficiency tests Active versus passive fund management Testing for weak market efficiency Tests of the random walk hypothesis Filter rule tests Other statistical tests The day-of-the-week effects The January effect The winner-loser problem Testing for semi-strong market efficiency The results of event studies The size effect The price-earnings effect The earnings-announcement effect Stockmarket crashes Testing the strong form of market efficiency Directors' .managers' share purchases Information content of analysts' forecasts Conclusions 11 The Foreign Exchange Market 11.1 Introduction 11.2 Exchange rate definitions 11.3 Characteristics and participants of the foreign exchange market 11.4 Arbitrage in the foreign exchange market 11.5 The spot and forward exchange rates 11.6 A simple model of the determination of the spot exchange rate 11.7 Alternative exchange rate regimes 11.8 The determination of the forward exchange rate 11.9 Nominal, real and effective exchange rates 11.10 Conclusions 12 Theories of Exchange Rate Determination 12.1 Introduction 12.2 Purchasing power parity theory 12.3 Absolute PPP 12.4 Relative PPP 12.5 Measurement problems in testing for PPP 12.6 Empirical evidence on PPP Summary of the empirical evidence on PPP Explaining the poor performance of purchasing power parity Modern theories of exchange rate determination Uncovered interest rate parity The monetary models of exchange rate determination The flexible-price monetary model The Dornbusch sticky-price monetarist model A simple explanation of the Dornbusch model A formal explanation of the Dornbusch model A money supply expansion and exchange rate 'overshooting' Importance of the Dornbusch overshooting model The Frankel real-interest-rate-differential model Conclusions 13 Financial Futures Introduction The growth of futures exchanges Comparison between futures and forward contracts The symmetry of profits/losses on futures/forward positions Exchange-traded derivative contracts versus the over-the-counter market Trading in Exchange futures contracts The role of the clearing house Open interest and reversing trades Short-term interest rate futures The pricing of Eurofutures Using Eurofutures Bond futures contract The price conversion factor The cheapest-to-deliver bond Determination of bond futures prices Currency futures The pricing of currency futures Stock index futures The pricing of a stock index futures Conclusions 14 Options 14.1 Introduction 14.2 The growth of options markets 14.3 Options contracts A call option contract A put option contract Stock index options Interest rate options Currency options The role of option contracts Differences between options and futures contracts A currency option versus a forward contract for hedging A currency option versus a forward for speculating Option strategies Exotic options Conclusions 15 The Pricing of Options 325 Introduction Principles of option pricing Intrinsic value and time value The distribution of the option premium between time and intrinsic value The Black-Scholes option pricing formula A numerical example of the Black-Scholes formula Different measures of volatility The calculation of historical volatility Problems with the Black-Scholes option pricing formula The sensitivity of options prices Put-call parity Conclusions 16 Swap Markets Introduction Potential swap scenarios An interest rate swap Currency swap agreements The role of the intermediary in the swap The secondary market in swaps Distinguishing characteristics of the swap market from the forward and futures markets Reasons for the existence of the swap market Innovations in the swap market Conclusions 348 35 1 355 358 359 361 362 363 364 17 The Regulation of the Financial Sector 17.1 17.2 17.3 17.4 17.5 17.6 17.7 17.8 17.9 17.10 17.11 17.12 17.13 17.14 17.13 Introduction The rationale for government intervention The objectives of government regulation Types of government regulation Regulation of the banking sector Statutory versus self-regulation Regulation in the United Kingdom Big Bang, 1986 The Financial Services Act 1986 The Banking Act 1987 European regulation The First Banking Directive 1977 The Second Banking Directive 1989 International regulation - the Basle Accord 1988 Conclusions Bibliography Index

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