From the book - One of the most important concepts in finance is the concept of arbitrage, also called the law of one price. In frictionless markets, the same asset must have one price at a particular instant in time, no matter where it is traded. Arbitrage is clearest in ... click here for more details.
From the book - Bond futures contracts allow market participants to agree to buy or sell bonds at delivery dates in the future. Investors who are long in bond futures are able to lock-in future lending interest rates. Investors taking short positions in bond futures are able to lock-in future ... click here for more details.
From the book - Corporate and municipal bonds usually allow the issuer to call the bonds at a stated call price. This call feature permits the issuer to refund the issue at a later date after a decline in interest rates. A refunding allows the firm to replace a high-coupon ... click here for more details.
From the book - A bond represents a contractual agreement between an issuer, bondholders, and a trustee. The obligations of the parties are spelled out in the bond indenture, which contains protective covenants. Violation of this contractual agreement constitutes default. Bankruptcy is a legal proceeding, administered by special bankruptcy courts. ... click here for more details.
From the book - While many varieties of debt instruments exist, all debt instruments are affected by macroeconomic factors determining the underlying interest rate. This chapter discusses macroeconomic factors affecting interest rates. The first part discusses the Federal Reserve and its impact on rates. Next, the loanable funds approach shows ... click here for more details.
From the book - The purpose of this chapter is to provide an understanding of the relationships between exchange rates and international investing. The factors determining currency exchange rates are discussed, as well as the impacts of exchange rates on international trade and investment.
From the book - Many financial intermediaries play an important role in the debt markets. Investment banking firms market debt securities on behalf of issuers. Dealers make markets in the resale (secondary) market. Brokers act as agents for buyers and sellers in the resale markets. Mutual funds, insurance companies, pension ... click here for more details.
From the book - For many years, futures contracts on physical commodities have been traded. In recent years, active markets have developed for financial futures contracts. This chapter describes futures contracts for physical commodities and the use of futures contracts in risk reduction and hedging. Chapter 15 examines financial futures ... click here for more details.
From the book - This chapter discusses the issuers of securities in the United States, including the US Treasury, municipalities, corporations, US government and government-sponsored agencies, and mortgage issuers. The US Treasury issues debt to finance federal budget deficits. Given the large cumulative total of the deficits over time, the ... click here for more details.
From the book - The most active market for securities as measured by daily volume of trading is the money market, which is defined as the market for securities with less than 1 year to maturity at the original issue date. Money market instruments include the following: Treasury bills, federal ... click here for more details.