Samenvatting Investments and portfolio management

ISBN-10 0071289143 ISBN-13 9780071289146
110 Flashcards en notities
7 Studenten
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Dit is de samenvatting van het boek "Investments and portfolio management". De auteur(s) van het boek is/zijn Zvi Bodie, Alex Kane, Alan J Marcus. Het ISBN van dit boek is 9780071289146 of 0071289143. Deze samenvatting is geschreven door studenten die effectief studeren met de studietool van Study Smart With Chris.

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Samenvatting - Investments and portfolio management

  • 1 The Investment Environment

  • Real assets: the land, buildings, machines, knowledge that can be used to produce goods and services. It generates net income to economy.
  • financial assets: stocks and bonds. They define the allocation of income or wealth among investors.
  • 3 broad types of financial assets
    1. fixed income / debt securities
    2. equity / common stock
    3. derivative securities
  • mechanisms to mitigate potential agency problems
    -compensation plans tie the income of managers to the success of the firm
    -boards of directors can force out management teams
    -security analysts and large institutional investors monitor the firm closely and can make the life uncomfortable of poor performers
    -bad performance will lead to threats of take-over
  • proxy fight/contest
    seeking enough rights to vote with the shares of other shareholders to take control of the firm and vote in another board
  • Sarbanes-Oxley Act (2002)
    -requires corporations to have more independent directors, so more directors who are not managers or affiliated with managers
    - requires each CFO to personally vouch for the corporations accounting statements
    -created an oversight board to oversee the auditing of public companies
    - prohibits auditors from providing various other services to clients
  • type of decisions in constructing their portfolios
    asset allocation
    security selection
  • top-down portfolio construction
    starts with asset allocation

    bottom-up strategy
    portfolio is constructed from securities that seem attractively priced without much concern for the resultant asset allocation
  • Investment banking industry
    primary market: investment banks handle the marketing of new issues of securities to the public

    secondary market: here investors can trade previously issued securities among themselves
  • Glass-Steagall Act (1999 withdrawn)
    prohibits banks in the U.S. from bboth accepting deposits and underwriting securities, so it forced a separation of the investmend and commercial banking industries
  • LIBOR rate
    interest rate at which major money-center banks lend to each other
  • 2 Asset classes and Financial Instrument

  • Money market
    Money market instruments/cash equivalents/cash include short-term, marketable, liquid, low-risk debt securities
  • capital market
    longer term and riskier securities, which are much more diverse, therefore subdivided in four segments
    -longer term bond markets
    -equity markets
    -derivative markets for options
    -derivative markets for futures
  • T-bills
    most marketable of all money market instruments

    asked price: the price you would have to pay to buy a T-bill from a security dealer

    bid price: the slightly lower price you will receive if you want to sell a bill to a dealer
  • flaws of the bank discount method
    -assumes a year had only 360 days
    -computes the yields as a fraction of par value

  • Certificate of Deposit - CD
    time deposit with a bank which cant be withdrqwn on demand
  • commercial paper
    short-term unsecured debt notes issued by large well-known companies, up to 270 days
  • asset-backed commercial paper
    short-term commercial paper used to raise funds for the institution to invest in other assets which are used as collateral for the papers
  • Eurodollars
    dollar-denominated deposits at foreign-banks or branches of American banks, thus they excape regulation by Federal Reserve
  • Eurodollars CD's
    less liquid and riskier than domestic CD's, therefore higher yields
  • repurchage agreements / repo's / RP's
    short-term overnight borrowing. the dealer sells government securities to an investor with an agreement to buy back those securities the next day at a slightly higher price

    term repo: can be 30 days or more
    reverse repo: securities are exchanged the other way around
  • broken the buck
    a fund that sufffered losses large enough to force value per share below $1
  • Treasury notes
    are issued with maturities ranging up to 10 years

    Treasury bonds
    are issued with maturities ranging up from 10 to 30 years

    both have semi annual interest payments called coupon payments
  • TIPS (Treasury Inflation Protected Securities)
    Principle amount on these bonds is adjusted in proportion to increases in the CPI (consumer price index)

  • Eurobond
    a bond denominated in a currency other than that of the country in which it is issued
  • Municipal bond
    issued by state and local governments, their interest income is exempt from federal income taxation and also exempt from taxation in the issuing state.
    capital gain taxes must be paid when the bonds mature or if they are sold with profit
  • common stock/ equity securities/ equities
    represent ownership shares in a corporation
  • ADR/American Depository Receipts/ADS
    certificates traded in U.S. markets that represent ownership in shares of a foreign company
  • Call option
    gives the holder the right to purchase an asset for a specified price (exercise/strike price) on or before a specified expiration date
  • put option
    gives the holder the right to sell an asset for a specified exercise price on or before a specified expiration date
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