Thư viện tài liệu, ebook tổng hợp lớn nhất Việt Nam

Measuring credit risk Banks employ credit analysts who review the financial information of corporations applying for loans and evaluate their creditworthiness Determining the collateral The bank must decide whether to require collateral than can back the loan Determining the loan rate Ratings are used to determine the premium to be added to th...

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Regulation of securities services (cont’d) Deregulation of underwriting services In 1989, the Fed approved debt underwriting applications for banks based on the requirements that: Banks had sufficient capital to support the subsidiary that would perform the underwriting Banks had to be audited to ensure that their management was capable of unde...

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Bank loans (cont’d) Loans supporting leveraged buyouts The loan amount provided by a single bank to support an LBO is usually between $15 million and $40 million LBO financing is attractive to banks because of the high loan rate Firms request LBO financing because they perceive that the market value of certain publicly held shares is too low S...

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Forward contracts Forward contracts are contracts typically negotiated with a commercial bank that allow the purchase or sale of a specified amount of a particular foreign currency at a specified exchange rate on a specified future date The forward market facilitates the trading of forward contracts Commercial banks profit from the difference be...

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Rate-capped swaps A rate-capped swap involves the exchange of fixed-rate payments for floating-rate payments that are capped The floating-rate payer pays an up-front fee for this feature The fixed-rate payer may allow the cap if it believes interest rates will not exceed the cap and receives the up-front fee Equity swaps An equity swap involve...

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Economic conditions and market conditions can cause abrupt changes in the stock rice or in the anticipated volatility of the stock price This would have a major impact on the stock option premium Indicators monitored by participants in the option market Option market participants closely monitor the indicators that are monitored for stocks: Eco...

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Using interest rate futures to create a short hedge (cont’d) Tradeoff from using a short hedge Interest rate futures can hedge against both adverse and favorable events The probability distribution of returns is narrower with hedging than without hedging Institutions that frequently use interest rate futures may be able to reduce the variabilit...

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Specialists and market-makers (cont’d) Front running involves the specialist setting a price below the price offered by other investors May prevent other investors from having their orders executed if the price reverses as a result The “trade-through rule” on the NYSE requires that an order for stocks must be executed on the exchange that offers...

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Market-related factors Investor sentiment In some periods, stock market performance is not highly correlated with existing economic conditions Stocks can exhibit excessive volatility because their prices are partially driven by fads and fashions A study by Roll found that only one-third of the variation in stocks returns can be explained by sys...

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An IPO is a first-time offering of shares by a specific firm to the public Usually, a growing firm first obtains private equity funding from VC firms An IPO is used to obtain new funding and to offer VC firms a way to cash in their investment Many VC firms sell their shares in the secondary market between 6 and 24 months after the IPO

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