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INVESTMENTS

Bodie. Marcus. Kane. Fourth Edition. INVESTMENTS. Chapter 1. The Investment Environment. 1-1. Investments & Financial Assets. Essential nature of investment Reduced current consumption Planned later consumption Real Assets Assets used to produce goods and services Financial Assets

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INVESTMENTS

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  1. Bodie Marcus Kane Fourth Edition INVESTMENTS

  2. Chapter 1 The Investment Environment 1-1

  3. Investments & Financial Assets • Essential nature of investment • Reduced current consumption • Planned later consumption • Real Assets • Assets used to produce goods and services • Financial Assets • Claims on real assets 1-2

  4. Role of Financial Assets and Markets in the Economy • Consumption Timing • Allocation of Risk • Separation of Ownership 1-3

  5. Financial System Clients and Their Needs • Household Sector • Primary Need: Invest Funds • Business Sector • Primary Need: Raise Funds • Government Sector • Primary Need: Raise Funds 1-4

  6. How the Financial System Meets the Needs of Participants • Financial Intermediation • Investment Banking • Financial Innovation & Derivatives • Responding to Regulation & Taxes 1-5

  7. Investments and Innovation Technology and Delivery of Service • Computer advancements • More complete and timely information Globalization • Domestic firms compete in global markets • Performance in regions depends on other regions • Causes additional elements of risk 1-6

  8. Key Trends - Globalization International and Global Markets Continue Developing • Managing foreign exchange • Diversification to improve performance • Instruments and vehicles continue to develop • Information and analysis improves 1-7

  9. Key Trends - Securitization Securitization & Credit Enhancement • Offers opportunities for investors and originators • Changes in financial institutions and regulation • Improvement in information capabilities • Credit enhancement and its role 1-8

  10. Key Trends - Financial Engineering Repackaging Services of Financial Intermediaries • Bundling and unbundling of cash flows • Slicing and dicing of cash flows • Examples: strips, CMOs, dual purpose funds, principal/interest splits 1-9

  11. The Future • Globalization continues and offers more opportunities • Securitization continues to develop • Continued development of derivatives and exotics • Strong fundamental foundation is critical • Integration of investments & corporate finance 1-10

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