Invest Like a Pro

Fund managers have long been using the advantages offered by the financial markets to enhance their investment strategies in portfolios of stocks and bonds. A whole body of financial derivatives, known as equity derivatives, has grown up around their needs. These derivatives are available for use by private investors as well as by smaller non-financial companies who, for various reasons, hold small portfolios of equity investments. Investors do not generally have the knowledge or expertise on how to use these derivatives in combination with investments in stocks and bonds. The basic idea and purpose of Invest Like a Pro is to make that knowledge available to the educated investor. It is not intended to be a manual on investing in stocks and bonds as such. It doesn't matter what investment strategy an investor uses; the information in Invest Like a Pro will enhance that strategy's result. This book is intended to be a valuable addition to an investor's arsenal of knowledge on investment and not merely to present a substitute or alternative investment strategy. If you're investing in stocks and bonds, you've got to have this book.

List of contents

Chapter 1 - How Professionals Invest With Derivatives
Background to modern investment practice
Portfolio risk management
How derivatives support investments
Financial derivatives Chapter 2 - The Fear of Derivatives and other Disasters
Some popular derivatives scandals
The background to Metallgesellschaft
The Procter & Gamble debacle
Chapter 3 - The Essence of Equity Derivatives
Equity market derivatives
Futures exchanges
Equity derivatives
Chapter 4 - Understanding Financial Options
The fundamental principles of options
Option pricing
The intrinsic value of an option
The time value of an option
The Greeks
Exercising options
The risk of the parties to an option
Equity option structures
Chapter 5 - Understanding Equity Futures, Treasury Futures and CFDs
Some basic features of futures contracts
The three innovations of the futures contract
A standardized contract
Contract negotiability or on-saleability
The virtual elimination of credit risk
Pricing the futures
The basis
Treasury futures
Certificates for Difference
Chapter 6 - The Simple Measure of Investment
Basic risk management theory
Single-factor risk models
Correlation
Determining the hedge ratio
Calculating the risk
Chapter 7 - Strategies for Building Investment Portfolios with Derivatives
The benchmark
Benchmarking a portfolio
Benchmarking with derivatives
Proxy trading or 'placeholders'
Restructuring a portfolio
Chapter 8 - Strategies to Protect Investment Value
Hedging in principle
When hedging is appropriate and when not
Hedging the value of a portfolio
Hedging the value of a single stock
Cost-reduction strategies with options
Conclusions on hedging.
 
 
 

About the author

John J. Stephens After reading Political Science and Law at the University of Witwatersrand in Johannesburg, South Africa, John Stephens was called to the bar. His time at the Bar included a term as Senior State Advocate in the Central Branch of the Attorney General's office, when he laft legal practice to act as business consultant and financial advisor for a portfolio of companies. This eventually included some of the largest financial institutions in South Africa. John shares his knowledge and experience of successful investing with private investors across the globe. his popular The Business of Hedging is also published by Pearson Education under the Financial Times Prentice Hall imprint.

Summary

Private investors need to know how to risk manage their investment portfolios in exactly the same way as the professional investors manage theirs.  The experienced private investor will find this book invaluable.

Product details

• Authors: John Stephens
• Publisher: Pearson Academic
• Languages: English
• Product format: Paperback / Softback
• Released: 01.01.2002
• EAN: 9780273656791
• ISBN: 978-0-273-65679-1
• No. of pages: 188
• Weight: 340 g
• Series: Financial Times; Financial Times
• Subject: Guides > Law, job, finance > Money, bank, stock market