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Lect0Intro0 - Security markets Security COMM 374 Ali Lazrak...

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Unformatted text preview: Security markets Security COMM 374 Ali Lazrak January, 2011 Goal Goal Provide a solid foundation in the Provide fundamental principles of finance fundamental Discounting Discounting Risk Law of one price Arbitrage 2 Goal Goal Discuss the theory and relate it to current issues Discuss How to invest Asset pricing Derivatives and hedging Prepare for subsequent courses in finance 3 Course material Course Web site (WebCT) Lecture notes Practice problems: Not assigned but do Practice them! them! Assigned homeworks (2) / project (2) Textbook Bodie, Kane, Marcus, Perrakis and Ryan, Bodie, Investments Investments 4 Organization Organization Download lecture notes Download Do the assigned readings (lecture notes Do + textbook) before the class textbook) We will spend most of the class time We doing in-class practice exercises (including closed book quizzes, team work etc..) work 5 Typical lecture Start with a closed book individual quizz on the reading material (marked) Redo the same quizz with a team (marked) I will give you a set of problems/MCQs that each team will solve (some of them will be marked) Sometimes, I will provide mini lectures on the most difficult concepts Housekeeping rules Housekeeping Be on time, do not switch section Be Laptop: ok for taking notes but no web Laptop: browsing browsing Homework must be typed and returned on Homework typed time time Evaluation Evaluation Marked homework assignment I Portfolio optimization project Midterm exam CAPM project Marked homework assignment II Participation Final exam The participation mark depends on: • • • • • Performance for the individual quizzes Performance as a team member Peer evaluation form Interaction with me and with the rest of the class General attitude (observation of house keeping rules) General 3% 6% 30% 3% 3% 15% 40% 8 Doing well in the course Doing 3 factors Attend lectures and be an active member of Attend your team Read the lecture notes and the textbook Read (before and after class) (before Do the homework Additional help Office hours 9 Contact Contact In class, E-mail: [email protected] Class liaison person Office hrs: M:14-15.30 (DL434) or by appointment appointment Website: WebCT 10 Questions? Questions? 11 Investment Investment Current commitment of money or Current resources in expectation of future benefits benefits real assets: used to produce goods & services • example: factory, equipment, human capital financial assets: claims on real assets • example: stocks, bonds, options Involves risk 12 Investment Investment Difficulties to conceptualize and quantify risk Financial theory provides an understanding of Financial these risks these The theory can be applied for securities and The institutions design institutions Challenge: promote risk management while Challenge: dealing with moral hazard and adverse dealing selection selection 13 Financial sectors Financial Securities Banks Insurance All of these have a long history of promoting risk All management and dealing with moral hazard and adverse selection. 14 Course outline Course Pre midterm Institutions (markets, instruments, players) Fixed income securities and risk management Fixed of interest rate risk of Empirical facts on stock returns Portfolio theory 15 Course outline Course Post midterm The CAPM Derivative markets (options, futures) Market efficiency 16 Next Class Next Get familiar with the course website We will start the first chapter (lecture We notes will be posted tomorrow) notes Reading: Chapters 1, 2 from BKMPR #real vs financial asset #primary vs secondary markets #Financial intermediaries #Financial instruments: Money #Financial market, bond market, equities, 17 derivatives derivatives Questions Questions 18 ...
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