Nominal annual rate= ln (e rt)= ln(1+HPR)=LN( S2/S1)
Effective annual rate= e rt- 1
Limit-buy (below market price)and stop-buy(above market price)
Efficient market: depth (willing to trade below and above the market price)
Margin call : buy=P*(1-IM)/(1-MM) short= P*(1+IM)/(1+MM)
Adjusting a price-weighted index for stock splits---原价不变， 改变的是denominator
1) Recession: commodities and stocks.
2) Recovery: cyclical investments and commodities.
3) Early Expansion: overall stock market and real estate.
4) Late Expansion bonds and interest sensitive investments.
5) Slowing into Recession bonds and interest sensitive investments
Efficient market ; Fundamental; technician 对重大消息反应程度从快到慢
Quota-driven=price-driven dealers &traders
US national market system over the counter
If ROE< k 那么公司宁愿多发dividend, if retained earnings increase , it will lower company’s value
Comparable method guiding principle: law of one price
P/BV is an appropriate measure of net asset value for firms that primarily hold liquid assets.
P/CF is related to differences in long-run average stock return
P/S can be applied to distressed corporation since sales is always positive; compared to PE used in cyclical firm, P/S is more stable.
EV=market capitalization+ MV of preferred stock+ MV of debt-cash and investments
Discount interest computation applies to Eurodollar futures and T-bill futures
FRA LIBOR-based add-on interes
Currency swap 一定要交换本金
Currency forward can be settled in cash
Motivation for swap: reduce transaction costs, avoid costly regulation, and maintain privacy.
Close-end fund= NAV+ market influence