Securities Market Regulation in the United States1

Following the stock market crash in October 1929 in the United States, public confidence in the markets plummeted. Investors large and small, as well as the banks who had loaned to them, lost great sums of money in the ensuing Great Depression. There was a consensus that for the economy to recover, the public's faith in the capital markets needed to be restored. Congress held hearings to identify the problems and search for solutions. On the basis of findings in these hearings, Congress -...

Investing in Exotic Options

15.1 Chapter Introduction and Objectives In Chap. 14, we introduced the pricing of plain vanilla call and put options on dividend paying and nondividend paying stocks. In this chapter we introduce the pricing of exotic options. This chapter has the following objectives Introduce different types of exotic options Discuss the pricing of Barrier, Look back, Binary, Asian, and spread options Exotic options are a class of derivative products, which allow the buyer (or seller) of the option to...

Prospective Analysis Guidelines for Forecasting Financial Statements

Ignacio Velez-Pareja and Joseph Tham 8.1 Chapter Introduction and Objectives Having performed an accounting and financial analysis, an analyst has to forecast financial statements into the future. This is a precursor to valuation. Many methods of forecasting like percent sales method are available. In this chapter, we provide a comprehensive overview of prospective analysis. Although parts of the chapter are written from the perspective of a company's manager, they are still valid for an...

Defining Pure Active Return and Risk What Should Managers Be Hired to Deliver

We agree on the separation of market or policy risk and pure active risk, in principle. Let's go one step further and apply it in practice, separating these gross components of market risk (and return) and pure active risk (and return) in a real world context. The returns that usually pass for alphas - the simple differences between the benchmark return and the manager's return - are properly known just as active returns (without the pure). But these simple active returns might have more or...

Valuation of Convertible Bonds Nyborg 1996

A convertible is a combination of debt and equity option. So, the value of a convertible is the sum of the straight debt and option components. The option embedded in a convertible is an American-type option, not European because the investor can convert any time up to maturity. When pricing a convertible bond, analysts use a two-step process. First, compute the pure bond value of the convertible. This is equal to the net present value of the stated coupons and redemption value, using a series...

References

Amram M, Kulatilaka N 1999 Real options managing strategic investment in an uncertain world. Harvard Business School Press Amram M, Kulatilaka N 1999 Disciplined decisions aligning strategy with financial markets. Harvard Business Review Amram M, Kulatilaka N 1999 Uncertainty the new rules for strategy. J Business Strategy Amram M, Kulatilaka N 2000 Strategy and shareholder value creation the real options frontier. J Appl Corp Finance 13 2 Brennan MJ, Schwartz E 1992 A new approach to...

Nec

The terms of the NEC issue are given in Appendix 2 at the end of the chapter. In addition to the Trust Preferred Securities, NEC offered 100 billion Yen of Euro Yen Convertible Bonds mainly to institutional investors in the Euro market. The terms of the NEC issue are presented in Appendix 3. Mandatory convertibles are equity-linked securities that pay a higher dividend compared to the company's common stock for a certain number of years and then get converted into common shares on a specified...

Types of Capitalism

Broadly, there are two types of capitalism arm's length system e.g., U.S, U.K and relationship-based system e.g., Germany, Korea . In an arm's length market-based Anglo-Saxon system, a financier is protected by explicit contracts as opposed to a relationship-based system, which is largely self-governing parties honor agreements to maintain their reputation. In market-based system, relationship matters less. In a relationship-based system, the lending bank has a close long-term relationship with...