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Global Financial Instruments

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Presentation on theme: "Global Financial Instruments"— Presentation transcript:

1 Global Financial Instruments
Chapter 2 Global Financial Instruments

2 Major Classes of Financial Assets or Securities
Debt Money market instruments Bonds Common stock Preferred stock Derivative securities

3 Markets and Instruments
Money Market Debt Instruments Derivatives Capital Market Bonds Equity

4 Capital Market - Equity
Common stock Residual claim Limited liability Preferred stock Fixed dividends - limited Priority over common Tax treatment

5 Uses of Stock Indexes Track average returns
Comparing performance of managers Base of derivatives

6 Factors for Construction of Stock Indexes
Representative? Broad or narrow? How is it weighted?

7 Examples of Indexes - Domestic
Dow Jones Industrial Average (30 Stocks) Standard & Poor’s 500 Composite NASDAQ Composite NYSE Composite Wilshire 5000

8 Examples of Indexes - Int’l
Nikkei 225 & Nikkei 300 FTSE (Financial Times of London) Dax Region and Country Indexes EAFE Far East United Kingdom

9 Construction of Indexes
How are stocks weighted? Price weighted (DJIA) Market-value weighted (S&P500, NASDAQ) Equally weighted (Value Line Index)

10 Derivatives Securities
Options Basic Positions Call (Buy) Put (Sell) Terms Exercise Price Expiration Date Assets Futures Basic Positions Long (Buy) Short (Sell) Terms Delivery Date Assets


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