Fundamentals of Financial Instruments - An Introduction to Stocks, Bonds, Foreign Exchange, and Derivatives

In the newly revised Second Edition of Fundamentals of Financial Instruments: An Introduction to Stocks, Bonds, Foreign Exchange, and Derivatives, renowned finance trainer Sunil Parameswaran delivers a comprehensive introduction to the full range of financial products commonly offered in the financial markets.
 
Using clear, worked examples of everything from basic equity and debt securities to complex instruments--like derivatives and mortgage-backed securities - the author outlines the structure and dynamics of the free-market system and explores the environment in which financial instruments are traded. This one-of-a-kind book also includes:
* New discussions on interest rate derivatives, bonds with embedded options, mutual funds, ETFs, pension plans, financial macroeconomics, orders and exchanges, and Excel functions for finance
* Supplementary materials to enhance the reader's ability to apply the material contained within
* A foundational exploration of interest rates and the time value of money
 
Fundamentals of Financial Instruments is the ideal resource for business school students at the undergraduate and graduate levels, as well as anyone studying financial management or the financial markets. It also belongs on the bookshelves of executive education students and finance professionals seeking a refresher on the fundamentals of their industry.

List of contents

Preface xxiii
 
Preface to the First Edition xxiv
 
Acknowledgments xxv
 
About the Author xxvi
 
Chapter 1 An Introduction to Financial Institutions, Instruments, and Markets 1
 
The Role of an Economic System 1
 
A Command Economy 2
 
AMarket Economy 2
 
Classification of Economic Units 4
 
An Economy's Relationship with the ExternalWorld 6
 
The Balance of Trade 8
 
The Current Account Balance 8
 
Financial Assets 9
 
Money 10
 
Money as a Unit of Account or a Standard of Value 10
 
Money as a Medium of Exchange 11
 
Money as a Store of Value 11
 
Money Is Perfectly Liquid 11
 
Equity Shares 12
 
Debt Securities 12
 
Preferred Shares 14
 
Foreign Exchange 14
 
Derivatives 14
 
Forward and Futures Contracts 15
 
Options Contracts 16
 
Swaps 18
 
Mortgages and Mortgage-backed Securities 19
 
Hybrid Securities 19
 
Primary Markets and Secondary Markets 19
 
Exchanges and Over-the-Counter (OTC) Markets 21
 
Brokers and Dealers 22
 
The Need for Brokers and Dealers 23
 
Trading Positions 24
 
The Buy-side and the Sell-side 25
 
Investment Bankers 25
 
Direct and Indirect Markets 26
 
Mutual Funds 27
 
Money and Capital Markets 30
 
The Eurocurrency Market 31
 
The International Bond Market 32
 
Globalization of Equity Markets 34
 
Dual Listing 35
 
Fungibility 37
 
Arbitrage 37
 
Arbitrage with ADRs 38
 
GDRs 39
 
Risk 39
 
After the Trade - Clearing and Settlement 41
 
Dematerialization and the Role of a Depository 42
 
Custodial Services 43
 
Globalization - The New Mantra 43
 
Chapter 2 Mathematics of Finance 46
 
Interest Rates 46
 
The Real Rate of Interest 46
 
The Fisher Equation 48
 
Simple Interest & Compound Interest 49
 
Variables and Corresponding Symbols 50
 
Simple Interest 50
 
Compound Interest 51
 
Properties 53
 
Effective Versus Nominal Rates of Interest 55
 
A Symbolic Derivation 56
 
Principle of Equivalency 56
 
Continuous Compounding 57
 
Future Value 58
 
Present Value 59
 
The Mechanics of Present Value Calculation 59
 
Handling a Series of Cash Flows 60
 
The Internal Rate of Return 61
 
Evaluating an Investment 63
 
The Future Value Approach 63
 
The Present Value Approach 63
 
The Rate of Return Approach 63
 
Annuities: An Introduction 64
 
Present Value 64
 
Future Value 65
 
Annuity Due 66
 
Present Value 66
 
Future Value 67
 
Perpetuities 67
 
The Amortization Method 68
 
Amortization with a Balloon Payment 70
 
The Equal Principal Repayment Approach 71
 
Types of Interest Computation 71
 
The Simple Interest Approach 72
 
The Add-on Rate Approach 72
 
The Discount Technique 73
 
Loans with a Compensating Balance 73
 
Time Value of Money-related Functions in Excel 73
 
The Future Value (FV) Function in Excel 74
 
The Present Value Function in Excel 75
 
Computing the Present and Future Values of Annuities and Annuities Due in Excel 75
 
Amortization Schedules and Excel 76
 
Chapter 3 Equity Shares, Preferred Shares, and Stock Market Indices 78
 
Introduction 78
 
Par Value

About the author

SUNIL PARAMESWARAN, PhD, is Director and CEO of Tarheel Consultancy Services, a corporate training and management consulting firm. His professional expertise includes securities markets, financial derivatives, fixed income securities, and international finance. He obtained his doctorate from the Fuqua School of Business at Duke University in North Carolina, USA.

Summary

In the newly revised Second Edition of Fundamentals of Financial Instruments: An Introduction to Stocks, Bonds, Foreign Exchange, and Derivatives, renowned finance trainer Sunil Parameswaran delivers a comprehensive introduction to the full range of financial products commonly offered in the financial markets.

Using clear, worked examples of everything from basic equity and debt securities to complex instruments--like derivatives and mortgage-backed securities - the author outlines the structure and dynamics of the free-market system and explores the environment in which financial instruments are traded. This one-of-a-kind book also includes:
* New discussions on interest rate derivatives, bonds with embedded options, mutual funds, ETFs, pension plans, financial macroeconomics, orders and exchanges, and Excel functions for finance
* Supplementary materials to enhance the reader's ability to apply the material contained within
* A foundational exploration of interest rates and the time value of money

Fundamentals of Financial Instruments is the ideal resource for business school students at the undergraduate and graduate levels, as well as anyone studying financial management or the financial markets. It also belongs on the bookshelves of executive education students and finance professionals seeking a refresher on the fundamentals of their industry.

Product details

• Authors: Parameswaran, SK Parameswaran, Sunil K Parameswaran, Sunil K. Parameswaran, Sunil K. (Duke University Parameswaran
• Publisher: Wiley, John and Sons Ltd
• Languages: English
• Product format: Hardback
• Released: 31.03.2022
• EAN: 9781119816614
• ISBN: 978-1-119-81661-4
• No. of pages: 560
• Series: Wiley Finance; Wiley Finance Editions
• Subjects: Social sciences, law, business > Business > Management; Finanzwesen, finanzprodukte, Allg. Finanz- u. Anlagewesen, Finance & Investments, Finanz- u. Anlagewesen, Financial Products