Fundamentals of Financial Instruments : An Introduction to Stocks, Bonds, Foreign Exchange, and Derivatives

BThe essential guide to financial instruments, logically presented/b iFundamentals of Financial Instruments/i deals with the global financial markets and the instruments in which they trade. While most books on finance tend to be heavily mathematical, this book emphasizes the concepts in a logical, sequential fashion, introducing mathematical concepts only at the relevant times. As a result, the reader gains conceptual clarity reinforced by just the right level of technical detail to ensure a comprehensive exposure to the skills needed in the financial world.ulliEstablishes a strong foundation for understanding global marketsliActs as an invaluable resource for those considering a career in the financial marketsliOffers an accessible yet in-depth treatise on modern financial instrumentsliPresents a logical navigational path for a typical student of finance who is attempting to come to terms with the intricacies of the subject/ul Covering the fundamentals of various types of assets in a single volume, Fundamentals of iFinancial Instruments/i is a compact yet comprehensive one-stop reference for students and professionals in finance and economics.;""Contents""; ""Title""; ""Copyright""; ""Preface""; ""Acknowledgments""; ""Chapter 1: An Introduction to Financial Institutions, Instruments, and Markets""; ""The Role of an Economic System""; ""A Command Economy""; ""A Market Economy""; ""Classification of Economic Units""; ""An Economyâ€TMs Relationship with the External World""; ""The Balance of Trade""; ""The Current Account Balance""; ""Financial Assets""; ""Primary Markets and Secondary Markets""; ""Exchanges and OTC Markets""; ""Brokers and Dealers""; ""The Need for Brokers and Dealers""; ""Trading Positions"" Fundamentals of Financial Instruments: An Introduction to Stocks, Bonds, Foreign Exchange, and Derivatives Contents Preface Acknowledgments Chapter 1: An Introduction to Financial Institutions, Instruments, and Markets The Role of an Economic System A Command Economy A Market Economy Classification of Economic Units An Economy's Relationship with the External World The Balance of Trade The Current Account Balance Financial Assets Primary Markets and Secondary Markets Exchanges and OTC Markets Brokers and Dealers The Need for Brokers and Dealers Trading Positions The Buy Side and the Sell Side Investment Bankers Direct and Indirect Markets Mutual Funds Money and Capital Markets The Eurocurrency Market The International Bond Market Globalization of Equity Markets Dual Listing Fungibility Risk After the Trade: Clearing and Settlement Dematerialization and the Role of a Depository Custodial Services Globalization: The New Mantra Chapter 2: Mathematics of Finance Interest Rates The Real Rate of Interest The Fisher Equation Simple Interest Compound Interest Properties A Symbolic Derivation Principle of Equivalency Continuous Compounding Future Value Present Value Handling a Series of Cash Flows The Internal Rate of Return Evaluating an Investment Annuities: An Introduction Perpetuities The Amortization Method Amortization with a Balloon Payment The Equal Principal Repayment Approach Types of Interest Computation Loans with a Compensating Balance Chapter 3: Equity Shares, Preferred Shares, and Stock Market Indexes Introduction Par Value versus Book Value Voting Rights Statutory versus Cumulative Voting Proxies Dividends Dividend Yield Dividend Reinvestment Plans Stock Dividends Treasury Stock Splits and Reverse Splits Costs Associated with Splits and Stock Dividends Preemptive Rights Interpreting Stated Ratios Handling Fractions Physical Certificates versus Book Entry Tracking Stock Report Cards Types of Stocks Risk and Return and the Concept of Diversification Preferred Shares Callable Preferred Stock Convertible Preferred Shares Cumulative Preferred Shares Adjustable Rate Preferred Shares Participating Preferred Shares Dividend Discount Models A General Valuation Model The Constant Growth Model The Two-Stage Model The Three-Stage Model The H Model Stock Market Indexes Price-Weighted Indexes Changing the Divisor The Importance of Price Value-Weighted Indexes Changing the Base-Period Capitalization Equally Weighted Indexes Tracking Portfolios The Free-Floating Methodology Well-Known Global Indexes Margin Trading and Short Selling Terminology Maintenance Margin Regulation T and NYSE and NASD Rules Short Selling Chapter 4: Bonds Valuation of a Bond Par, Premium, and Discount Bonds Evolution of the Price Zero-Coupon Bonds Valuing a Bond in between Coupon Dates Day-Count Conventions Actual–Actual The Treasury's Approach Corporate Bonds Accrued Interest Yields Taxable-Equivalent Yield Credit Risk Bond Insurance Equivalence with Zero-Coupon Bonds The Yield Curve and the Term Structure Bonds with Embedded Options Price Volatility Duration and Price Volatility Dollar Duration Convexity Treasury Auctions When Issued Trading Price Quotes Bond Futures STRIPS Chapter 5: Money Markets Introduction Market Supervision The Interbank Market Interest-Computation Methods Term Money Market Deposits Federal Funds Correspondent Banks: Nostro and Vostro Accounts Payment Systems Fed Funds and Reserve Maintenance Treasury Bills Yields on Discount Securities Discount Rates and T-Bill Prices Primary Dealers and Open-Market Operations Commercial Paper Letters of Credit and Bank Guarantees Yankee Paper Credit Rating Bills of Exchange Eurocurrency Deposits Money Market Futures Chapter 6: Forward and Futures Contracts Introduction Spot–Futures Equivalence Cash-and-Carry Arbitrage Synthetic Securities The Case of Assets Making Payouts Physical Assets The Case of Multiple Deliverable Grades Trading Volume and Open Interest Cash Settlement Hedging and Speculation Estimation of the Hedge Ratio and the Hedging Effectiveness Speculation Leverage Contract Value Forward versus Futures Prices Locking in Borrowing and Lending Rates Hedging the Rate of Return on a Stock Portfolio Changing the Beta Program Trading Stock Picking Portfolio Insurance The Importance of Futures Chapter 7: Options Contracts Moneyness Exchange-Traded Options Speculation with Options The Two-Period Model Valuation of European Put Options Valuing American Options Implementing the Binomial Model in Practice The Black-Scholes Model The Greeks Option Strategies Chapter 8: Foreign Exchange Introduction Currency Codes European Terms and American Terms Appreciating and Depreciating Currencies Converting Direct Quotes to Indirect Quotes The Impact of Spreads on Returns Arbitrage in Spot Markets Cross Rates Value Dates The Forward Market Outright Forward Rates Swap Points Broken-Dated Contracts A Perfect Market The Cost Interpretation of the Swap Points Short-Date Contracts Option Forwards Nondeliverable Forwards Futures Markets Hedging Using Currency Futures Exchange-Traded Foreign Currency Options The Garman-Kohlhagen Model Put-Call Parity The Binomial Model Chapter 9: Mortgages and Mortgage-Backed Securities Introduction Market Participants Government Insurance and Private Mortgage Insurance Risks in Mortgage Lending Other Mortgage Structures Negative Amortization Graduated-Payment Mortgage WAC and WAM Pass-Through Securities Extension Risk and Contraction Risk Accrual Bonds Floating-Rate Tranches Notional Interest Only Tranche Interest-Only and Principal-Only Strips PAC Bonds Agency Pass-Throughs Chapter 10: Swaps Introduction Contract Terms Market Terminology Inherent Risk The Swap Rate Illustrative Swap Rates Determining the Swap Rate The Market Method Valuation of a Swap During Its Life Terminating a Swap The Role of Banks in the Swap Market Comparative Advantage and Credit Arbitrage Swap Quotations Matched Payments Currency Swaps Cross-Currency Swaps Currency Risks Hedging with Currency Swaps Appendix 1 Appendix 2 Bibliography Web Sites Index

The essential guide to financial instruments, logically presented

Fundamentals of Financial Instruments deals with the global financial markets and the instruments in which they trade. While most books on finance tend to be heavily mathematical, this book emphasizes the concepts in a logical, sequential fashion, introducing mathematical concepts only at the relevant times. As a result, the reader gains conceptual clarity reinforced by just the right level of technical detail to ensure a comprehensive exposure to the skills needed in the financial world.

• Establishes a strong foundation for understanding global markets
• Acts as an invaluable resource for those considering a career in the financial markets
• Offers an accessible yet in-depth treatise on modern financial instruments
• Presents a logical navigational path for a typical student of finance who is attempting to come to terms with the intricacies of the subject

Covering the fundamentals of various types of assets in a single volume, Fundamentals of Financial Instruments is a compact yet comprehensive one-stop reference for students and professionals in finance and economics.

The essential guide to financial instruments, logically presented Fundamentals of Financial Instruments deals with the global financial markets and the instruments in which they trade. While most books on finance tend to be heavily mathematical, this book emphasizes the concepts in a logical, sequential fashion, introducing mathematical concepts only at the relevant times. As a result, the reader gains conceptual clarity reinforced by just the right level of technical detail to ensure a comprehensive exposure to the skills needed in the financial world. Establishes a strong foundation for understanding global markets Acts as an invaluable resource for those considering a career in the financial markets Offers an accessible yet in-depth treatise on modern financial instruments Presents a logical navigational path for a typical student of finance who is attempting to come to terms with the intricacies of the subject Covering the fundamentals of various types of assets in a single volume, Fundamentals of Financial Instruments is a compact yet comprehensive one-stop reference for students and professionals in finance and economics. Fundamentals of Financial Instruments deals with the global financial markets and the instruments that are traded in them. Most books on Finance tend to be heavily mathematical, which is perhaps inevitable given the technical nature of the subject. A few which attempt to cover the basics often end up with a very superficial exposition due to the authors' desire to avoid technicalities. This book emphasizes the concepts in a sequential logical fashion. At the relevant stages adequate mathematical representations are introduced. The objective is to ensure that the reader gets conceptual clarity reinforced by just the right level of technicalities to ensure a comprehensive exposure Financial securities lend themselves naturally to a quantitative analysis. To ensure that readers, irrespective of their academic background, are able to navigate through the presentation, a detailed chapter is devoted to the topic of interest rates and the time value of money. Thereafter the focus shifts to the intricacies of various financial instruments, including Fundamentals of Financial Instruments is a comprehensive introduction to the full range of financial products commonly used in the financial markets. Author Sunil Parameswaran offers clear, worked examples of everything from basic equity and debt securities to complex instruments such as derivatives and mortgage-backed securities The book is intended to serve as a standalone reference for market professionals and MBA students. It can also be used as a detailed reference for augmenting standard textbooks used in courses such as Financial Derivatives, Fixed Income Securities, and International Finance. --Book Jacket