Transcript Investments - Long Island University

Bodie
Kane
Marcus
Fourth Edition
INVESTMENTS
Chapter 1
The Investment
Environment
1-1
Investments & Financial Assets
Essential nature of investment
- Reduced current consumption
- Planned later consumption
 Real Assets
- Assets used to produce goods and

services

Financial Assets
- Claims on real assets
1-2
Role of Financial Assets and
Markets in the Economy
Consumption Timing
 Allocation of Risk
 Separation of Ownership

1-3
Financial System Clients
and Their Needs
Household Sector
- Primary Need: Invest Funds
 Business Sector
- Primary Need: Raise Funds
 Government Sector
- Primary Need: Raise Funds

1-4
How the Financial System Meets
the Needs of Participants
Financial Intermediation
 Investment Banking
 Financial Innovation & Derivatives
 Responding to Regulation & Taxes

1-5
Investments and Innovation
Technology and Delivery of Service
 Computer advancements
 More complete and timely information
Globalization
 Domestic firms compete in global markets
 Performance in regions depends on other regions
 Causes additional elements of risk
1-6
Key Trends - Globalization
International and Global Markets
Continue Developing
 Managing foreign exchange
 Diversification to improve
performance
 Instruments and vehicles continue to
develop
 Information and analysis improves
1-7
Key Trends - Securitization
Securitization & Credit Enhancement
 Offers opportunities for investors and
originators
 Changes in financial institutions and
regulation
 Improvement in information
capabilities
 Credit enhancement and its role
1-8
Key Trends Financial Engineering
Repackaging Services of Financial
Intermediaries
 Bundling and unbundling of cash flows
 Slicing and dicing of cash flows
 Examples: strips, CMOs, dual
purpose funds, principal/interest
splits
1-9
The Future
Globalization continues and offers
more opportunities
 Securitization continues to develop
 Continued development of
derivatives and exotics
 Strong fundamental foundation is
critical
 Integration of investments &
corporate finance

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