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Brailsford3eSM_Ch04 - Chapter 4 Financial management...

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Copyright © 2006 Nelson Australia Pty Limited Chapter 4 Financial management: Derivative instruments and information sources Learning objectives After the completion of this chapter, you should be able to: understand the way in which derivative market operate in Australia and internationally identify and describe the major securities traded in Australian and International derivative markets. have an understanding of the relative importance of exchange and over-the-counter derivatives markets. understand the role and importance of information in an investment environment understand the role, significance and importance of private information and be able to compare public and private information understand the role of, and difference between, market information, industry information and security specific information be aware of the major indicators of Australian financial markets be aware of the major sources of current and historical information available to investors. Key points 1 Two issues relevant to the financial management of an investment are access to information and the use of derivatives. 2 Major Australian derivatives markets are the ASX and the SFE. 3 Information sources can be market, industry or security-specific in nature. Chapter outline 4.1 Introduction 1 Investors likely to hold portfolio that is potentially comprised of different asset classes and from both domestic and international markets. 2 Management often involves derivative use, particularly for actively managed approaches. 3 Lack of information can lead to poor investment decisions and ongoing problems with the management of investments. 4.2 The Australian derivatives market 1 Exchange traded derivatives include options traded on the ASX and futures and options on the SFE. 2 Non-exchange traded derivatives include forward contracts, foreign exchange forwards and swaps.
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2 Investments: Concepts and Applications Solutions Manual Copyright © 2006 Nelson Australia Pty Limited 4.3 International derivatives markets 1 SFE trading represents less than 2% of global market. 2 Largest exchanges in the world include the Eurex, CME and CBOT. 4.4 Types of information 1 Information is categorised into market (macro), industry or security-specific (micro) information. 2 Market indicators include equity, property, money market and bond market indices. 3 Other financial indices include consumer price index (CPI) and futures indices. 4.5 Sources of information 1 Primary sources of financial data in Australia include the Australian Financial Review (AFR), the Australian Stock Exchange (ASX) and the Sydney Futures Exchange (SFE). 4.6 Historical information 1 Examples of historical information available; for share prices (via DataStream, AGSM, SIRCA), company information (via the ASX, AGSM beta service, Jobson’s yearbooks), derivative information (ASXD, SFE), interest rate and government statistics (from the RBA and ABS).
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Brailsford3eSM_Ch04 - Chapter 4 Financial management...

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