Financial Markets and Government Bonds: A French Example, Sbobinature di Finanza

Scarica Financial Markets and Government Bonds: A French Example e più Sbobinature in PDF di Finanza solo su Docsity! Federica Aloi, Financial Markets -Introduction. • Provide Capital: Financial market allows owners of funds surpluses (banks, households, etc.) to place their financial resources on the market and allocate the supply of savings to the demanders of those savings. By providing a quick and easy access to financial resources, financial markets ensure the transfer between the financial and the real economy. • Government borrowing & the budget deficit: Financial markets are also providing liquidity to countries and hence allow governments to fund their economical and social policies. In many developed countries, governments are running a budget deficit, it means that in a given year, total government expenditure exceeds total tax revenue. In this case, using financial markets, they have to borrow this money. Most of the government debt is bought up by financial institutions but individuals can also buy government bonds. • Bonds: A bond is a debt security under which the issuer is obliged to pay interest and to repay the principal (il capitale/face value) at a later date. The price of a bond is expressed as a percentage of the face value. Characteristics : - Face value: la somma sulla quale il debitore paga gli interessi e che deve essere ripagata alla scadenza. - Coupon : Il tasso di interesse. - Maturity date : Data di scadenza - Maturity : La durata del contratto. Definition of government bond I governi si finanziano con i bond (govies). Government promise to pay its holder a predetermined and fixed amount of interest (coupon) each year (or semester, quarter) and to pay back the initial amount borrowed FV. Govies can be traded on the secondary market afterwards; are fixed-income investments (guadagno fisso) and risk-free assets (senza rischio, guadagno certo). Two main risks : Interest might not be paid and par value might not be returned to bondholder at maturity. Government using financial market : A French example La Francia nel 2017 ha bisogno di circa 185 bn I bond della Francia si chiamano OATS, quelli con scadenza uguale o maggiore di 7 anni vengono messi all’asta da AFT (Agency France Trèsor) il primo martedì di ogni mese; quelli con scadenza da 2 a 7 anni vengono messi all’asta il terzo martedì di ogni mese. Questo metodo che usa il governo francese si chiama “bid price system”: the highest bids (offerte) ((cioè quelle con tasso d’interesse più bassi”)) are first served, followed by lower bids and so on, up to Agency France Trésor's target amount Ensure investment liquidity Liquidity risk Il rischio di liquidità cresce nelle situazioni in cui una parte interessata nello scambio di un asset non può partecipare allo scambio perché nessuno nel mercato vuole scambiare quell’asset. Liquidity Le compagnie sul mercato vengono azioni, quando ci sono molte azioni che vengono continuamente vendute e comprate sul mercato, la compagnia è molto liquida. Free float The free float of a company is the proportion of shares that are held by investors who are likely to be willing to trade. (che sono disponibili a scambiare/vendere) It is a measure of how many shares are reasonably liquid. Market capitalization Market capitalization (or “market cap”) is a measurement of the size of a listed company, at a specific moment. Market cap = Share price × the number of shares outstanding. -Valuation is based on the stock price, which also depends on things the company has no impact on, such as politic, macroeconomic, or international events -From time to time, valuation can be excessive, on the upside or on the downside (nel bene e nel male) Market provides instant valuation - By providing a price for every single listed stock (titolo quotato), one can easily know the value of a company. - (in riferimento a) With regards to non-listed companies, valuation depends on work done by experts, and hence, always questionable. Market makes mergers (fusioni) easier Currency (Valuta) for acquisitions with shares When a company is making a bid (fare un’offerta) on another one, the bid can be funded (finanziata) in different ways : -In cash; -Shares in a listed company constitute a currency. By listing itself on the stock market, a company can make acquisitions financed partly with shares. This avoids excessive debt or needing to use cash assets. If the target company is also listed, the buyer can submit (presentare) a share exchange offer. Share exchange offer example On july 2015 Merger between Holcim (Switzerland) and Lafarge (France) - on May 28, 2015, Holcim launches the public exchange offer. - Shareholders of Lafarge will be offered 9 Holcim shares for 10 Lafarge shares. - Una condizione dell’offerta è che Holcim deve raggiungere almeno 2/3 del capitale azionario o diritti di voto della Lafarge. Stocks Markets over the world The largest exchanges in the world are run by (gestito da) private companies - They are not state-owned. (statali) - Most of them are listed on their own exchange. ? (cambio) Competition is tough - A private company looking for listing can basically set up an initial public offering (IPO) anywhere it wants. No obligation to list on the national stock exchange. - Size matters in the exchange business. The sector tends to consolidate. (rinforzare) - NYSE Euronext, London Stock Exchange, etc… are strongly competing to urge companies to list on their markets. *Un'offerta pubblica iniziale o IPO (dall'inglese initial public offering) è un'offerta al pubblico dei titoli di una società che intende quotarsi per la prima volta su un mercato regolamentato. Market infrastructures 1) US- NYSE Part of Intercontinental Exchange, an US holding company, listed on the NYSE. Previously, NYSE was part of NYSE Euronext, after the NYSE's 2007 merger with Euronext. NYSE Euronext was then bought by ICE, with has decided to operate them as 2 different divisions. NYSE is the world's largest stock exchange by market capitalization. Its listed companies accounted for around $20tr as of May 2015. - Average daily trading value is approximately US$170b. - On an average trading day, almost 2 billion shares ($68 billion) are traded on the NYSE. - On the NYSE, traders execute stock transactions on behalf of (per conto di) investors. They gather around the appropriate post where a “specialist” acts as an auctioneer in an open outcry auction to bring buyers and sellers together, The Trading Floor - The NYSE blends the aspects (è un mix di) of electronic trading and traditional auction (asta) market trading. - Buyers and sellers meet directly in a open and orderly market to compete for the best possible price through the interplay of supply and demand. - To be able to trade securities on the Trading Floor, an Exchange-issued trading license is required. Only qualified and approved NYSE broker-dealer entities may acquire and hold trading licenses. - Floor Brokers represent public orders to buy or sell shares and work to get their customers the best price. Brokers participate both in person and electronically on the Trading Floor. They buy and sell securities on the behalf of their customers. - Specialists. Each stock listed on the NYSE is allocated to a specialist, a market professional who acts as the contact point between brokers with orders to buy shares and brokers with orders to sell shares. Specialists act as auctioneers in the specific stocks they are designated to trade at a designated location, called a trading post. All buying and selling of a given stock occurs at that location. The biggest IPO of all the times (Alibaba) Alibaba ha fatto il record per la più grande IPO del mondo. La somma raccolta era di 25 billioni. 2) US- NASDAQ Nasdaq is the second largest stock exchange (after NYSE) and the world’s largest electronic stock exchange (in terms of trading volume). Most of the “tech” companies are listed on the Nasdaq (Microsoft, Apple, Google, Intel, Facebook…) Stock market indices A stock market index is a measurement of the value of a section of the stock market: a sample of companies considered to be relevant for the whole market. It is computed from the prices of selected stocks, most of the times a weighted average. It is a tool used by investors to know the financial performance of a specific market to compare the return on specific investments. Option holders get rights -A Buy Option (“call”) gives the holder the right to buy an asset at a certain price within a specific period of time. To buy a option, option holders must pay a premium. -A Sell Option (“put”) gives the holder the right to sell an asset at a certain price within a specific period of time. Option writers get obligations Call writers and put writers are obligated to buy or sell. As a counterpart, Call writers and put writers get the premium paid by holders. ETF: exchange trade fund (fondo d’investimento) The ETF replicates the performance of a reference index. Its objective is to generate return equal to that of its index. Each ETF can be traded in the same manner as a share and can therefore be bought or sold during trading hours. Diversification By buying an ETF, one can gain exposure to a specific market with a single transaction, making diversification very easy. In this way, ETFs facilitate access to the main asset classes (equities, bonds, commodities, etc…) as well as investment in different sectors and geographic regions. Low cost ETFs offer an attractive cost structure since they are exempt from subscription and redemption fees. The management fees, which are low in comparison with other comparable financial instruments, are deducted directly from the daily net asset value. Transactions costs may occur (regular brokerage fees). Liquidity ETFs are liquid instruments that can be bought and sold via market makers, who are obliged to act as counterparty for purchases and sales during market opening hours on the various exchanges. Their aim is to provide low bid/offer spreads. Investors therefore have the security of being able to buy or sell ETF whenever they wish during trading hours.