INVESTMENT

1. INVESTMENT 高雅琴 gaoyaqin@buaa.edu.cn 2011.2

2. 课程说明 • 课程简介 • 课程目标

3. 课程简介 本课程主要介绍金融市场基本工具、金融市场理论、金融投资理论的基本概念和基本原理、基本方法与技术，使学生具有对一般证券的投资分析能力。

4. 课程目标 • 掌握投资环境的具体内容、投资过程的步骤和证券市场构成； • 掌握资本资产定价模型的假设条件、套利原理、套利组合的构建以及套利的价格效应，掌握对APT定价方法的解释； • 了解有效市场的投资策略、无效市场的投资策略以及技术分析方法，掌握共同基金投资的特点； • 掌握债券的定价理论、久期的含义及计算、免疫资产的含义及构造、免疫资产存在的问题，掌握普通股定价模型； • 掌握期货合约的内容、期货结算所的各项规定、期货价格与预期现货价格的关系，期货价格与现货当前价格的关系； • 掌握期权合约的类型、保证金的要求及计算，掌握期权价格的构成，期权定价模型； • 掌握金融工程的策略和互换，了解近期金融工程的创新。

5. 主要参考书 • Zvi Bodie, Alex Kane, Alan J. Marcus, Investments, 6th edition, china machine press • 博迪等，投资学（机械工业出版社）

6. 课程说明 • 基本要求 • 不无故迟到、早退或者缺课 • 不扰乱课堂秩序 • 按时完成作业 • 评估方法 • 平时成绩(作业和出勤):30% • 期末闭卷考试：70% • 联系方式 • Office: A1007 • Phone: 15910878302 • Email: Serene_g@163.com/gaoyaqin@buaa.edu.cn

7. CHAPTER 1Investments Background

8. CONTENT 1.1 Real Assets versus Financial Assets 1.2 Financial Markets and the Economy 1.3 Clients of the Financial System 1.4 The Environment Responds to Clientele Demands 1.5 Recent Trends

9. 1.1 Real Assets versus Financial Assets

10. Financial Versus Real Assets • Real assets • Assets used to produce goods and services • Land, building, knowledge, machine, workers • Represent material wealth of a society • Financial Assets • Claims on real assets • Stocks and bonds • Allow for separation of ownership and management of the firm • Means for individuals to hold their claims on real assets • Facilitate the transfer of funds to enterprises with attractive investment opportunities • Indirectly contribute to the productive capacity of the economy

11. Financial Versus Real Assets • Financial Assets-Claims on real assets • Income generated by real assets is allocated to investors according to their ownership of the financial assets. • Bondholders • Equityholders

12. Financial Versus Real Assets

13. Financial Versus Real Assets • Essential nature of investment • Reduced current consumption • Planned later consumption • To hold financial assets (invest for the future)

14. Financial Versus Real Assets • Differences: • Real assets produce goods and services • Financial assets define the allocation of income or wealth among investors • Distinguish • Appearance on Balance Sheet • Destroy • Financial assets are created and destroyed in ordinary course of doing business • Real assets are destroyed by accident or by wearing out over time

15. Table 1.1. Balance Sheet – U.S. Households, 2006

16. Table 1.2 Domestic Net Worth, 2006

17. 1.2 Financial Markets and the Economy

18. Financial Markets • Consumption Timing • Allocation of Risk • Separation of Ownership and Management

19. Financial Markets • Consumption Timing • Shift purchasing power from high-earnings periods to low-earnings periods • Store savings in financial assets • Sell financial assets to provide funds when needed

20. Financial Markets • Allocation of Risk • Investors can self-select into security types with risk-return characteristics that best suit their preferences • Invest in a plant: stock or bond? • Each security can be sold for the best possible price

21. Financial Markets • Separation of Ownership and Management • Group of stockholders can’t participate in day-to-day management • Elect a board of directors, hire and supervise the management • Agency problems • The potential conflicts of interest that the managers may be tempted to engage in activities not in the best interest of the shareholders.

22. 1.3 Clients of the financial system

23. The Clients • Business Firms – net borrowers • Households – net savers • Governments – can be both borrowers and savers

24. The Clients-The household sector • How to invest money Interested in a wide array of assets depending on their economic situation • Tax: different tax brackets • Risk: • risk tolerance • hedging demand • diversification

25. The Clients- Business Firms • How to raise money to finance their investments in real assets • Borrow from banks or issue bonds • Issue stocks • Get the best price • At the lowest cost

26. Table 1.4 Balance Sheet of Nonfinancial U.S. Business

27. The Clients- Governments • Raise money to finance their expenditures by borrowing • No stock issue • Treasury bonds/Treasury bills • special advantage • Creditworthy • At lowest rate • Regulate the financial environment

28. 1.4 The environment responds to clientele demands

29. The environment responds to clientele demands • When clients demand, the profit-seeking suppliers provide service with charge, leading to diversity of financial markets • Financial Intermediaries • Banks • Investment companies • Insurance companies • Credit unions • Investment Bankers

30. Financial Intermediaries • Sell their own liabilities to raise funds that are used to purchase liabilities of other corporations • Banks, investment companies, insurance companies, credit unions

31. Financial Intermediaries • Banks • What banks do? • Raise funds (deposit) • Lend to other borrowers (loan) • What service banks provide ? • Convenience and cost saving (problem of coordination) • What profit banks get ? • Interest Spread

32. Financial Intermediaries • Assets and liabilities are overwhelmingly financial • To channel household savings to business sector • Pool small /lend to large • Diversification • Expertise

33. Table 1.3 Balance Sheet of Commercial Banks

34. Financial Intermediaries • Investment companies- mutual fund • What they do? • Pool money • Large-scale trading • What service they provide ? • As an investment agent, convenience, cost saving, specialization • What profit they get ? • Management fee

35. Investment banking • Services to firms • Advise the issuing firm on prices, market conditions, appropriate interest rate, etc • Handle the marketing of the security issue to the public • Importance of their reputation

36. Financial Innovation and Derivatives • Responses to perceived profit opportunities created by as-yet unsatisfied demands for securities with particular risk, return, tax and timing attributes • Innovative security design • Securitization of Mortgages: GNMA pass-through security • Derivative securities /Primitive security

37. Financial Innovation and Derivatives • Primitive security • Offer returns based only on the status of the issuer • Bond: on the solvency of the issuing firm • Stock: firm’s financial position • Derivative securities • yield returns depending on additional factors pertaining to the prices of other assets • Stock option: on price of the underlying stock

38. Responses to taxation and regulation • Examples: • Regulation Q—Eurodollar market • Tax avoidance – Zero-Coupon bond

39. 1.5 The Investment Process

40. Investment Process • Saving - insured bank account • Investing - choose what assets to hold • An investor’s portfolio • Collection of investment assets • Top-down portfolio construction Two types of decisions to construct portfolio • Asset allocation • Security selection • Security analysis

41. 1.6 Markets and Market Structure

42. Markets and Market Structure • Direct search market • Sporadic, low-priced, nonstandard goods • Example, used goods • Brokered market • Offer search service to buyers and sellers • Example, real estate market • Primary market, investment bankers act as brokers • Block transactions, brokers or block houses search directly for other large traders

43. Markets and Market Structure • Dealer markets • Dealers specialize in various assets, trade assets for their own accounts • Profit is bid-ask spread • Auction market • All transactors in a good converge at one place to bid on or offer a good

44. 1.7 RECENT TRENDS

45. Globalization • Managing foreign exchange • Diversification to improve performance • Instruments and vehicles continue to develop (WEBs) • Information and analysis improves

46. Globalization • Ways of foreign investment (U.S) • ADR (American Depository Receipts) • Represent claims to shares of foreign stocks • Purchase foreign securities offered in dollar • Buy mutual funds that invest internationally • Buy derivatives that depend on foreign securities • WEBS (world equity benchmark shares) • Trade portfolios of foreign stocks in a selected country, tracking the performance of an index for that country

47. Securitization • Allow borrowers to enter capital markets directly, pools of loans are aggregated into pass-through securities

48. Figure 1.2 Asset-backed Securities Outstanding

49. Financial Engineering • Use of mathematical models and computer-based trading technology to synthesize new financial products • Repackaging Services of Financial Intermediaries • Bundling and unbundling of cash flows • Examples: strips, CMOs, dual purpose funds, principal/interest splits

50. Unbundling – Mortgage Security