Microsoft PowerPoint - PoF.ppt

Principles of Finance Summer Term 2005 Helmut Elsinger [email protected] ...

Contactƒ 2 Helmut Elsinger ƒ Email: [email protected] ƒ Phone: 01/ 4277 38057 ƒ Office Hours: Tu. 10-11 a.m. ...

Course Gradeƒ 3 You have to prepare the assigned exercises . In total you have to prepare and mark at least 50% of all ex ercise ...

SyllabusPart 1 - Single-period random cash flows 4 Stocks (incl. empirical features of returns)Mean-variance portfolio theoryUti ...

Literatureƒ 5 First Part:Investment Science, David Luenberger, Oxford University Press ƒ Second Part:Options, Futures, and Other ...

Overviewƒ 6 Financial markets and the firm ƒ Players in financial markets ƒ Products traded on financial markets ƒ Classificatio ...

Financial markets and the firm 7 Source: Admati (2002) Introduction to financial markets ...

Players in financial marketsƒ 8 Borrowers: need funds ƒ Lenders / investors: wish to invest funds ƒ Hedgers: want to reduce risk ...

Players in financial markets: FIƒ 9 ... matching borrowers and lenders / investors ƒ Ex-post information asymmetry between poten ...

Products traded on financial marketsƒ 10 Bonds / FI securities (deterministic CF stream): e.g. classification according to issue ...

Classification of financial marketsƒ 11 ...according to types of markets / traded products: bond market, stock market, derivativ ...

Pricingƒ 12 Supply and demand Ä price and quantity in an equilibrium Introduction to financial markets 60 50 40 30 20 10 0 02468 ...

Pricingƒ 13 What determines the price at which investors are willing to trade? ƒ Expectations about future cash flows ƒ Timing o ...

Pricingƒ 14 Returns for different asset classes in Switzerland Source: Spremann (2002) Introduction to financial markets ...

Overviewƒ 15 Important stock markets ƒ Types of stocks ƒ Types of trades ƒ Computing returns ƒ Empirical features of returns ƒ A ...

Important stock marketsƒ 16 Market ca p italisation in million USD. Source: Exchan g e End 1990 End 1995 End 2000 NYSE 2 692 123 ...

Types of stocksƒ 17 Common stock ƒ ... residual claim on the earnings of the firm ƒ Common stockholders can expect to receive th ...

Types of tradesƒ 18 Classification on the basis of the execution price ƒ Market order: executed at the best available price ƒ Li ...

Types of tradesƒ 19 Long position: owning an asset (e.g. 100 OMV shares) ƒ Short position / short selling ƒ Borrow shares from s ...

Computing returnsƒ 20 Simple returns, discrete compounding ƒ Log returns, continuous compounding ƒ Relation between simple and l ...