Financial Assets and Markets: An Overview of Debt, Equity, and Derivatives, Slides of Banking and Finance

Download Financial Assets and Markets: An Overview of Debt, Equity, and Derivatives and more Slides Banking and Finance in PDF only on Docsity! Chapter 1. Introduction • financial assets • financial markets • derivatives markets Docsity.com I. Financial Assets • assets = anything with value – tangible = physical property – intangible = legal claim to something of value Docsity.com debt vs. equity • debt security – cash flows are fixed – bonds, loans • equity security – cash flow variable, residual – common stock Docsity.com Price & risk • price of security = PV of expected cash flows – use appropriate discount rate – are cash flows certain? Docsity.com Risk • degree of uncertainty about cash flows – inflation – default – exchange rates – liquidity – regulation Docsity.com Classification • type of assets – debt market – equity market • maturity of assets – money market (short-term debt) – capital market (long-term) Docsity.com • time of delivery of assets – cash/spot market -- exchange immediately after trade – derivative market -- exchange in future even though trade today Docsity.com • age of asset – primary market (newly issued) – secondary market (previously issued) • structure of market – exchange (physical location) – over-the-counter (dealers) Docsity.com