Finance and accounting Books

Book SynopsisA comprehensive guide to the burgeoning hedge fund industry Intended as a comprehensive reference for investors and fund and portfolio managers, Handbook of Hedge Funds combines new material with updated information from Francois-Serge L'habitant's two other successful hedge fund books.Trade Review"...Das 'Handbook of Hedge Funds'deckt ein breites Spektrum zum Thema Hedgefonds ab und ist für Praktiker und Akademiker geeignet, die sich einen umfassenden Überblick zu dieser Asset-Klasse verschaffen wollen bzw. vertiefende Kenntnisse anstreben. Ein wichtiges Standardwerk..." Absolut report Nr 36 Feb/März 2007Table of ContentsForeword by Mark Anson xv 1 Introduction 1 PART I HEDGE FUND OVERVIEW 2 History Revisited 7 2.1 The very early years: The 1930s 7 2.2 The formative years (1949–1968) 8 2.3 The dark ages (1969–1974) 11 2.4 The renaissance (1975–1997) 12 2.5 The Asian and Russian crises (1997–1998) 15 2.6 The equity bubble years 18 2.7 Hedge funds today 19 2.8 The key characteristics of modern hedge funds 24 2.9 The future 35 3 Legal Environment 37 3.1 The situation in the US 39 3.1.1 The Securities Act (1933) 39 3.1.2 Securities Exchange Act (1934) 44 3.1.3 Investment Company Act 46 3.1.4 Investment Advisers Act (1940) 48 3.1.5 Blue-sky laws 55 3.1.6 National Securities Markets Improvement Act (1996) 55 3.1.7 Employee Retirement Income Security Act (1974) 56 3.1.8 Other regulations 56 3.1.9 The Commodity Futures Trading Commission 57 3.2 The situation in Europe 59 3.2.1 The UCITS directives and mutual fund regulation 59 3.2.2 The case of European hedge funds 62 3.2.3 Germany 63 3.2.4 France 69 3.2.5 Italy 75 3.2.6 Switzerland 76 3.2.7 Ireland 78 3.2.8 Spain 80 3.3 The situation in Asia 81 3.4 Internet and the global village 81 4 Operational and Organizational Structures 85 4.1 Legal structures for stand-alone funds 85 4.1.1 In the United States (“onshore”) 85 4.1.2 Outside the United States (“offshore”) 87 4.2 A network of service providers 90 4.2.1 The sponsor and the investors 91 4.2.2 The board of directors 91 4.2.3 The investment adviser 92 4.2.4 The investment manager or management company 92 4.2.5 The brokers 93 4.2.6 The fund administrator 99 4.2.7 The custodian/trustee 103 4.2.8 The legal counsel(s) 103 4.2.9 The auditors 105 4.2.10 The registrar and transfer agent 106 4.2.11 The distributors 106 4.2.12 The listing sponsor 107 4.3 Specific investment structures 108 4.3.1 Mirror funds 108 4.3.2 Master/feeder structures 109 4.3.3 Managed accounts 112 4.3.4 Umbrella funds 114 4.3.5 Multi-class/multi-series funds 115 4.3.6 Side pockets 116 4.3.7 Structured products 117 4.4 Disclosure and documents 118 4.4.1 Private placement memorandum (PPM) 118 4.4.2 Memorandum and articles of association 118 4.4.3 ADV form 118 4.4.4 Limited partnership agreements 119 4.4.5 Side letters 119 5 Understanding the Tools Used by Hedge Funds 121 5.1 Buying and selling using a cash account 121 5.2 Buying on margin 122 5.2.1 Mechanics 122 5.2.2 Buying on margin: an example 124 5.3 Short selling and securities lending 126 5.3.1 Mechanics of short selling 127 5.3.2 A detailed example 134 5.3.3 Restrictions on short selling 135 5.3.4 Potential benefits of short selling 139 5.3.5 Alternatives to securities lending: repos and buys/sell backs 140 5.4 Derivatives 142 5.4.1 Terminology 144 5.4.2 Basic derivatives contracts 144 5.4.3 Credit derivatives 146 5.4.4 Benefits and uses of derivatives 149 5.5 Leverage 151 PART II HEDGE FUND STRATEGIES AND TRADE EXAMPLES 6 Introduction 159 7 Long/Short Equity Strategies 163 7.1 The mechanics of long/short equity investing 163 7.1.1 A single position 163 7.1.2 Sources of return and feasible portfolios 165 7.1.3 Disadvantages of long/short equity investing 169 7.2 Investment approaches 170 7.2.1 The valuation-based approach 170 7.2.2 Sector specialist hedge funds 174 7.2.3 Quantitative approaches 175 7.2.4 Equity non-hedge hedge funds 175 7.2.5 Activist strategies 176 7.3 Historical performance 181 8 Dedicated Short 187 8.1 The pros and cons of dedicated short selling 187 8.2 Typical target companies and reactions 188 8.3 Historical performance 193 9 Equity Market Neutral 197 9.1 Definitions of market neutrality 197 9.1.1 Dollar neutrality 197 9.1.2 Beta neutrality 198 9.1.3 Sector neutrality 200 9.1.4 Factor neutrality 200 9.1.5 A double alpha strategy 202 9.2 Examples of equity market neutral strategies and trades 203 9.2.1 Pairs trading 203 9.2.2 Statistical arbitrage 207 9.2.3 Very-high-frequency trading 208 9.2.4 Other strategies 211 9.3 Historical performance 211 10 Distressed Securities 215 10.1 Distressed securities markets 215 10.1.1 The origins: railways 215 10.1.2 From high yield to distressed securities 216 10.1.3 The distressed securities market today 219 10.2 Distressed securities investing 226 10.2.1 Why distressed securities? 226 10.2.2 Legal framework 227 10.2.3 Valuation 228 10.2.4 Active versus passive 230 10.2.5 Risks 232 10.3 Examples of distressed trades 233 10.3.1 Kmart 233 10.3.2 Failed leveraged buyouts 234 10.3.3 Direct lending 235 10.3.4 The case of airlines 236 10.4 Historical performance 239 11 Merger Arbitrage 243 11.1 Mergers and acquisitions: a historical perspective 243 11.2 Implementing merger arbitrage: basic principles 246 11.2.1 Arbitraging a cash tender offer 247 11.2.2 Arbitraging a stock-for-stock offer (fixed exchange rate) 250 11.2.3 Arbitraging more complex offers 252 11.3 The risks inherent in merger arbitrage 254 11.4 Historical performance 263 12 Convertible Arbitrage 269 12.1 The terminology of convertible bonds 269 12.2 Valuation of convertible bonds 272 12.2.1 Valuation from an academic perspective 272 12.2.2 Valuation from a practitioner perspective (the component approach) 273 12.2.3 Risk measurement and the Greek alphabet 277 12.3 Convertible arbitrage: the basic delta hedge strategy 279 12.4 Convertible Arbitrage in practice: stripping and swapping 285 12.5 The strategy evolution 287 12.6 Historical performance 293 13 Fixed Income Arbitrage 297 13.1 The basic tools of fixed income arbitrage 297 13.2 Examples of sub-strategies 299 13.2.1 Treasuries stripping 299 13.2.2 Carry trades 301 13.2.3 On-the-run versus off-the-run Treasuries 301 13.2.4 Yield-curve arbitrage 303 13.2.5 Swap-spread arbitrage 304 13.2.6 The Treasury–Eurodollar spread (TED) 305 13.3 Historical performance 306 14 Emerging Markets 311 14.1 The case for emerging market hedge funds 311 14.2 Examples of strategies 314 14.2.1 Equity strategies 314 14.2.2 Fixed income strategies 319 14.3 Historical performance 323 15 Global Macro 327 15.1 Global macro investment approaches 327 15.2 Examples of global macro trades 328 15.2.1 The ERM crisis (1992) 329 15.2.2 The ECU arbitrage 332 15.2.3 The Asian crisis (1997) 333 15.2.4 The euro convergence (1995–1997) 337 15.2.5 Carry trades 340 15.2.6 The twin deficits 344 15.2.7 Risk management and portfolio construction 345 15.3 Historical performance 346 16 Managed Futures and Commodity Trading Advisors (CTAs) 351 16.1 The various styles of managed futures 352 16.1.1 Trading approach: discretionary versus systematic 352 16.1.2 Type of analysis: fundamental versus technical 354 16.1.3 Source of returns: trend followers and non trend followers 354 16.1.4 Timeframe for trades 355 16.2 Examples of systematic trading rules 355 16.2.1 Moving Average Convergence/Divergence (MACD) 355 16.2.2 Examples of trading ranges signals 361 16.2.3 Portfolio construction 363 16.2.4 Transparency or regulated black boxes? 363 16.2.5 Investment vehicles 365 16.2.6 Back-testing and calibration 365 16.3 Historical Performance 366 16.4 The future of managed futures 370 17 A Smorgasbord of Other Strategies 373 17.1 Capital structure arbitrage and credit strategies 373 17.2 Weather derivatives, weather insurance and catastrophe bonds 381 17.3 Mutual Fund Arbitrage 382 17.3.1 The forward pricing mechanism 383 17.3.2 The loopholes in forward pricing 384 17.3.3 Unethical, but persistent 386 17.3.4 A brutal ending 387 17.4 Arbitraging between NAVs and quoted price: Altin AG 388 17.5 Split strike conversion 390 17.6 Event-Driven Special Situations 392 17.7 Cross-listing and dual-listing arbitrage 393 17.7.1 Cross-listed companies and ADRs 393 17.7.2 Dual-listed companies 394 17.8 From public to private equity 395 17.9 Regulation D and PIPEs funds 397 17.10 IPO Lock-up Expirations 398 PART III MEASURING RETURNS, RISKS AND PERFORMANCE 18 Measuring Net Asset Values and Returns 403 18.1 The difficulties of obtaining information 404 18.2 Equalization, crystallization and multiple share classes 406 18.3 The inequitable allocation of incentive fees 406 18.4 The free-ride syndrome 407 18.5 Onshore versus Offshore Funds 408 18.6 The multiple share approach 409 18.7 The equalization factor/depreciation deposit approach 410 18.8 Simple Equalization 414 18.9 Consequences for performance calculation 414 18.10 The holding period return 415 18.11 Annualizing 417 18.12 Multiple hedge fund aggregation 418 18.13 Continuous compounding 419 19 Return Statistics and Risk 423 19.1 Calculating return statistics 423 19.1.1 Central tendency statistics 426 19.1.2 Gains versus losses 428 19.2 Measuring risk 429 19.2.1 What is risk? 430 19.2.2 Range, quartiles and percentiles 430 19.2.3 Variance and volatility (standard deviation) 431 19.2.4 Back to histograms, return distributions and z-scores 434 19.3 Downside risk measures 439 19.3.1 From volatility to downside risk 439 19.3.2 Semi-variance and semi-deviation 440 19.3.3 The shortfall risk measures 443 19.3.4 Value at risk 443 19.3.5 Drawdown statistics 446 19.4 Benchmark-related statistics 447 19.4.1 Intuitive benchmark-related statistics 447 19.4.2 Beta and market risk 448 19.4.3 Tracking error 449 20 Risk-Adjusted Performance Measures 451 20.1 The Sharpe ratio 455 20.1.1 Definition and interpretation 455 20.1.2 The Sharpe ratio as a long/short position 457 20.1.3 The statistics of Sharpe ratios 457 20.2 The Treynor ratio and Jensen alpha 460 20.2.1 The CAPM 460 20.2.2 The market model 462 20.2.3 The Jensen alpha 463 20.2.4 The Treynor (1965) ratio 465 20.2.5 Statistical significance 466 20.2.6 Comparing Sharpe, Treynor and Jensen 466 20.2.7 Generalizing the Jensen alpha and the Treynor ratio 467 20.3 M2, M3 and Graham–Harvey 468 20.3.1 The M2 performance measure 468 20.3.2 GH1 and GH2 470 20.4 Performance measures based on downside risk 472 20.4.1 The Sortino ratio 472 20.4.2 The upside potential ratio 473 20.4.3 The Sterling and Burke ratios 474 20.4.4 Return on VaR (RoVaR) 475 20.5 Conclusions 476 21 Databases, Indices and Benchmarks 479 21.1 Hedge fund databases 479 21.2 The various biases in hedge fund databases 479 21.2.1 Self-selection bias 480 21.2.2 Database/sample selection bias 482 21.2.3 Survivorship bias 482 21.2.4 Backfill or instant history bias 484 21.2.5 Infrequent pricing and illiquidity bias 485 21.3 From databases to indices 487 21.3.1 Index construction 487 21.3.2 The various indices available and their differences 490 21.3.3 Different indices – different returns 503 21.3.4 Towards pure hedge fund indices 505 21.4 From indices to benchmarks 508 21.4.1 Absolute benchmarks and peer groups 509 21.4.2 The need for true benchmarks 510 PART IV INVESTING IN HEDGE FUNDS 22 Introduction 515 23 Revisiting the Benefits and Risks of Hedge Fund Investing 517 23.1 The benefits of hedge funds 518 23.1.1 Superior historical risk/reward trade-off 518 23.1.2 Low correlation to traditional assets 520 23.1.3 Negative vs positive market environments 523 23.2 The benefits of individual hedge fund strategies 527 23.3 Caveats of hedge fund investing 534 24 Asset Allocation and Hedge Funds 537 24.1 Diversification and portfolio construction: an overview 537 24.1.1 Diversification 538 24.1.2 Portfolio construction 539 24.1.3 Asset allocation 541 24.2 Strategic asset allocation without hedge funds 543 24.2.1 Identifying the investor’s financial profile: the concept of utility functions 543 24.2.2 Establishing the strategic asset allocation 546 24.3 Introducing hedge funds in the asset allocation 547 24.3.1 Hedge funds as a separate asset class 547 24.3.2 Hedge funds vs traditional asset classes 548 24.3.3 Hedge funds as traditional asset class substitutes 549 24.4 How much should be allocated to hedge funds? 551 24.4.1 An informal approach 552 24.4.2 The optimizers’ answer: 100% in hedge funds 553 24.4.3 Static versus dynamic allocations 554 24.4.4 Dealing with “return management” 555 24.4.5 Optimizer’s inputs and the GIGO syndrome 556 24.4.6 Non-standard efficient frontiers 560 24.4.7 How much should we allocate to hedge funds? 561 24.5 Hedge funds as portable alpha overlays 561 24.6 Hedge funds as sources of alternative risk exposure 564 24.7 Risk budgeting and the separation of alpha from beta 565 25 Hedge Fund Selection: A Route Through the Maze 569 25.1 Stating objectives 569 25.2 Filtering the universe 570 25.3 Quantitative Analysis 571 25.4 Qualitative Analysis 572 25.5 Due Diligence: between art and science 573 25.5.1 The strategy 573 25.5.2 The fund itself 574 25.5.3 The management team 575 25.5.4 The infrastructure 575 25.5.5 The process 576 25.6 Ongoing monitoring 576 25.7 Common mistakes in the selection process 577 26 Funds of Hedge Funds 579 26.1 What are funds of hedge funds? 579 26.2 Advantages of funds of funds 579 26.2.1 Efficient Risk Diversification 580 26.2.2 Affordability and Accessibility 582 26.2.3 Professional management and built-in asset allocation 583 26.2.4 Access to closed funds 583 26.2.5 Better internal and external transparency 584 26.3 The dark side of funds of funds 584 26.3.1 Yet another layer of fees! 584 26.3.2 Extra liquidity 585 26.3.3 Lack of control, overdiversification and duplication 587 26.4 Selecting a fund of funds 587 26.5 Fund allocation: A look inside the “black box” 588 26.5.1 Qualitative approaches 588 26.5.2 Quantitative approaches 589 26.6 The future of funds of funds 589 27 Structured Products on Hedge Funds 591 27.1 Total return swaps linked to hedge funds 591 27.2 Call options on hedge funds 592 27.3 Basic notes and certificates 593 27.4 Capital protected notes 594 27.4.1 The financial engineering process of capital protected notes 595 27.4.2 The first generation: the naive approach 595 27.5 The second generation: The option-based approach 598 27.6 The third generation: the dynamic trading approach 602 27.7 The fourth generation: options on CPPI 608 27.8 The flies in the ointment 608 27.9 The future of capital guaranteed products 610 27.10 Collateralized hedge fund obligations 610 28 Conclusions 615 Bibliography 617 Index 625

Read more less

Book SynopsisAn Introduction to Corporate Finance provides the reader with a complete overview of Corporate Finance from perspective of the investment Banker. The author, a corporate trainer and former investment banker clarifies the role of the investment banker in numerous corporate finance transactions, including mergers & acquisitions, IPO''s, and valuation. Given today''s corporate climate, every student studying corporate finance and those working in the field need this book to sharpen their skill set.Table of ContentsAbout the author xv 1 ‘BEHIND THE CHINESE WALL’ 1 Corporate finance in investment banking 2 Chinese walls 3 Corporate finance assignments 5 Flotations/IPOs 6 Mergers, acquisitions and divestitures 8 Leveraged buyouts and management buyouts 13 Financial advice 13 Careers in corporate finance 15 Organisation of this book 20 Part I CORPORATE FINANCE TRANSACTIONS 23 2 SOURCES OF CAPITAL 25 Debt securities 27 Money market securities 27 Long-term debt 29 Floating rate notes 31 Equity 32 Preference shares 32 Ordinary shares 34 Hybrids (convertible securities) 36 3 FLOTATIONS/INITIAL PUBLIC OFFERINGS 39 Primary offerings 40 Ancillary benefits of flotation 46 Disadvantages of flotation 46 Methods of flotation 47 Suitability for listing 49 The offering process 52 Participants and roles 52 Documentation and regulation 55 Due diligence and verification 57 Marketing, syndication and pricing 59 Underwriting 62 4 INTERNATIONAL EQUITY OFFERINGS 65 Rationale for international offerings 66 International investors 68 Development of international equity offerings 69 Regulation and documentation 70 Depository receipts 73 Marketing, syndication and distribution 75 Offer structure 76 Price setting, underwriting and bookbuilding 77 Fees and commissions 79 After the new issue 81 Stabilisation 81 5 RIGHTS ISSUES/SECONDARY OFFERINGS 83 Pre-emption rights 85 Setting the price 87 Calculating the theoretical rights price 88 Rights issue timetable 90 Fees and commissions 90 Secondary offerings 94 Marketed offerings 95 Bought deals 96 Accelerated bookbuilding 98 Demergers 100 6 MERGERS AND ACQUISITIONS 101 Rationale for M&A 102 Types of merger 104 Merger waves 106 Financing the transaction 107 Bootstrap transactions 109 Regulation of M&As 110 Key elements of the City Code 111 7 MANAGEMENT BUYOUTS 115 Financial structure 118 Bank finance (secured lending) 120 Private equity funds 122 Mezzanine finance 123 High-yield bonds 124 Part II CORPORATE FINANCE TECHNIQUES 127 8 VALUING SECURITIES 129 Valuing bonds 130 Valuing shares and companies 132 Cash flow based valuations 135 Determination of terminal/residual value 139 Determining the discount rate 143 Determining the value of the business 143 Relative valuations 146 Price earnings ratio 148 Price/EBIT multiple 149 Market to book value 149 Dividend yield 150 Enterprise value to EBITDA 151 Determining the value of a business based on ratios/multiples 152 9 DETERMINING THE COST OF CAPITAL 159 Weighted average cost of capital 160 Use market values 161 Use target/optimal weighting 162 After tax 163 Match nominal rates with nominal cash flows 163 Cost of debt: Kd 165 Cost of equity: Ke 166 Capital asset pricing model 168 Risk-free rate 170 Market risk premium (equity risk premium) 170 Beta (β) 171 Health warning 172 10 SHAREHOLDER VALUE ADDED (ECONOMIC PROFIT) 173 Just another number? 174 Benefits of SVA 175 Calculation of SVA 177 Limitations of economic profit calculations 181 Appendix: UK CORPORATE VALUATION METHODS: A SURVEY 183 Scoring and tables 184 A.1 Valuation methodology 185 A.1.1 Frequency of use 186 A.1.2 Calculation of final valuation or value range 188 A.2 Discounted cash flows 189 A.2.1 DCF approaches 189 A.2.2 Forecast period 190 A.2.3 Terminal value 191 A.3 Cost of capital 192 A.3.1 Determining the cost of equity 192 A.3.2 Capital asset pricing model 193 Sources of information 197 Glossary 199 List of abbreviations 211 Additional reading 213 Index 215

Read more less

Book SynopsisProfessional investors are bombarded on a day to day basis with assertions about the role liquidity is playing and will play in determining prices in the financial markets.Table of ContentsForeword by Russell Napier xiii Acknowledgements xvii About the Authors xix List of Tables, Figures and Charts xxiii Introduction 1 Appetiser 1 Structure of the book 2 Language and jargon 2 Academic theories 3 Modern Portfolio Theory 3 The Efficient Markets Hypothesis 4 Forms of investment analysis 4 Fundamental analysis 4 Monetary analysis 5 Technical analysis 5 The intuitive approach 6 What the book is going to say 6 PART I THE LIQUIDITY THEORY 9 1 Types of Trades in Securities 11 2 Persistent Liquidity Trades 15 3 Extrapolative Expectations 21 4 Discounting Liquidity Transactions 25 5 Cyclical Changes Associated with Business Cycles 37 6 Shifts in the Savings Demand for Money 43 PART II FINANCIAL BUBBLES AND DEBT DEFLATION 49 7 Financial Bubbles 51 8 Debt Deflation 55 PART III ELABORATION 59 9 Creation of Printing-press Money 61 10 Control of Fountain-pen Money and the Counterparts of Broad Money 65 11 Modern Portfolio Theory and the Nature of Risk 71 12 Technical Analysis and Crowds 81 13 The Intuitive Approach to Asset Prices 87 14 Forms of Analysis 93 PART IV EVIDENCE AND PRACTICAL EXAMPLES 101 15 The UK Markets Prior to 1972 103 16 The US Equity Market 1960–2002 109 17 Two Forecasts 113 18 Debt Deflation, Practical Experience 119 PART V MONITORING DATA 121 19 Monitoring Current Data for the Monetary Aggregates 123 20 Monitoring Data for the Supply of Money 139 21 The Different Sectors of the Economy 145 Glossary 149 References 157 Index 159

Read more less

Book SynopsisOffering a deep insight into the venture capital deal-making process, Raising Venture Capital also provides valuable introduction to the subject. The book is practical in focus but based on sound academic theory, research and teaching materials gathered over the last 4 years at Tanaka Business School.Table of ContentsPreface xiii Part I The Business of Venture Capital 1 1 Entrepreneurs and Venture Capitalists 3 2 Other People’s Money 9 3 The Limited Partnership 15 4 The Competitive Environment 25 5 The VC's Investment Model 31 Part II Accessing Venture Capital 49 6 Introduction to Part II 51 7 Is Venture Capital the Right Option? 53 8 Choosing a VC Firm 59 9 The Entry Point 65 10 The Investment Process 71 11 Preparing for the Investment Process 81 Part III The VC Term Sheet 99 12 Introduction to Term Sheets 101 13 Business Valuation 121 14 Investment Structure 123 15 Syndication 125 16 Investment Milestones 129 17 Corporate Governance 139 18 Equity Participation 147 19 Share Incentives 169 20 Share Vesting 175 21 Pre-emption Rights on Securities Issues 185 22 Anti-dilution Rights 191 23 Provisions Relating to Share Transfers 203 24 Deal Management Terms 219 Index 229

Read more less

Book SynopsisCurrency Strategy, Second Edition develops new techniques and explains classic tools available for predicting, managing, and optimizing fluctuations in the currency markets.Table of ContentsPreface to the Second Edition. Acknowledgements. About the Author. Introduction. PART ONE: THEORY AND PRACTICE. 1 Fundamental Analysis: The Strengths and Weaknesses of Traditional Exchange Rate Models. 1.1 Purchasing Power Parity. 1.2 The Monetary Approach. 1.3 The Interest Rate Approach. 1.4 The Balance of Payments Approach. 1.5 The Portfolio Balance Approach. 1.6 Summary. 2 Currency Economics: A More Focused Framework. 2.1 Currencies are Different. 2.2 Currency Economics. 2.3 Summary. 3 Flow: Tracking the Animal Spirits. 3.1 Some Examples of Flow Models. 3.2 Speculative and Non-Speculative Flows. 3.3 Summary. 4 Technical Analysis: The Art of Charting. 4.1 Origins and Basic Concepts. 4.2 The Challenge of Technical Analysis. 4.3 The Art of Charting. 4.4 Schools of (Technical) Thought. 4.5 Technical Analysis and Currency Market Practitioners. PART TWO: REGIMES AND CRISES. 5 Exchange Rate Regimes: Fixed or Floating? 5.1 An Emerging World. 5.2 A Brief History of Emerging Market Exchange Rates. 5.3 Fixed and Pegged Exchange Rate Regimes. 5.4 Exchange Rate Regime Sustainability – A Bi-Polar World? 5.5 The Realworld Relevance of the Exchange Rate Regime. 5.6 Summary. 6 Model Analysis: Can Currency Crises be Predicted? 6.1 A Model for Pegged Exchange Rates. 6.2 A Model for Freely Floating Exchange Rates. 6.3 Summary. PART THREE: THE REAL WORLD OF THE CURRENCY MARKET PRACTITIONER. 7 Managing Currency Risk I – The Corporation: Advanced Approaches to Corporate Treasury FX Strategy. 7.1 Currency Risk. 7.2 Types of Currency Risk. 7.3 Managing Currency Risk. 7.4 Measuring Currency Risk – VaR and Beyond. 7.5 Core Principles for Managing Currency Risk. 7.6 Hedging – Management Reluctance and Internal Methods. 7.7 Key Operational Controls for Treasury. 7.8 Tools for Managing Currency Risk. 7.9 Hedging Strategies. 7.10 Optimization. 7.11 Hedging Emerging Market Currency Risk. 7.12 Benchmarks for Currency Risk Management. 7.13 Budget Rates. 7.14 The Corporation and Predicting Exchange Rates. 7.15 Summary. 8 Managing Currency Risk II – The Investor: Currency Exposure within the Investment Decision. 8.1 Investors and Currency Risk. 8.2 Currency Markets are Different. 8.3 To Hedge or not to Hedge – That is the Question! 8.4 Absolute Returns – Risk Reduction. 8.5 Selecting the Currency Hedging Benchmark. 8.6 Relative Returns – Adding Alpha. 8.7 Examples of Active Currency Management Strategies. 8.8 Emerging Markets and Currency Hedging. 8.9 Summary. 9 Managing Currency Risk III – The Speculator: Myths, Realities and How to be a Better Currency Speculator. 9.1 The Speculator – From Benign to Malign. 9.2 Size Matters. 9.3 Myths and Realities. 9.4 The Speculators – Who they are. 9.5 The Speculators – Why They Do It. 9.6 The Speculators – What They Do. 9.7 Currency Speculation – A Guide. 9.8 Summary. 10 Applying the Framework. 10.1 Currency Economics. 10.2 Flow Analysis. 10.3 Technical Analysis. 10.4 Long-Term Valuation. 10.5 The Signal Grid. 10.6 Risk Appetite Indicators. 10.7 Exchange Rate Regimes. 10.8 Currency Crises and Models. 10.9 Managing Currency Risk I – The Corporation. 10.10 Managing Currency Risk II – The Investor. 10.11 Managing Currency Risk III – The Speculator. 10.12 Currency Strategy for Currency Market Practitioners. 10.13 Summary. 11 EmergingWorld: New Growth Markets for Global FX. 11.1 The Growth of Emerging Markets as an Asset Class. 11.2 Increasing Importance of EM Currencies. 11.3 Explosive Growth in Asian Currencies. 11.4 Asian NDF Markets: Growth and Liberalization. 11.5 Emerging European Currencies. 11.6 Latin American Currencies. 11.7 Summary. Conclusion. Index.

Read more less

Book SynopsisThe study of Behavioural finance is relatively new and examines how individuals' attitudes and behaviour affect their financial decisions and financial markets. Behavioural Finance builds on existing knowledge and skills that students have already gained on an introductory finance or corporate finance course.Table of ContentsPreface xv Acknowledgements xvii 1 Introduction 1 1.1 Illustration and Structure 2 1.2 Finance Theory as an Engine not a Camera 3 1.2.1 Rational Fools or Folly of Wisdom? 5 1.3 Rebuilding on New Foundations 7 1.3.1 Reasoned Emotion: The Case of Phineas Gage 8 1.3.2 What Can Psychologists Bring to Finance? 9 1.4 Challenging the Classical Assumptions of Finance 9 1.5 Modelling Behavioural Aspects of Finance 11 1.6 The Structure of the Book 12 Appendix: A Financial Tsunami 14 Notes 14 References 14 Part I Foundations 17 2 Financial Decision Making 19 2.1 Illustration and Structure 19 2.2 The Expected Utility Rule 20 2.2.1 An Illustration of Expected Utility 21 2.2.2 Attitudes to Risk 22 2.2.3 Diversification as Risk Reduction Strategy 23 2.2.4 How Best To Bear Risk 24 2.3 Expected Utility Theory: Simple But Untrue? 26 2.3.1 Paradoxes and Problems in Early Understanding of Expected Utility Theory 27 2.3.2 Gambling Insurance and Aspiration 29 2.4 Frames for Actions, Contingencies and Outcomes 31 2.4.1 The Decision Process 31 2.4.2 Inferring Big Ideas from Small Samples 32 2.4.3 Stars with Feet of Clay 33 2.4.4 Is There More to Life Than (Maximizing) Utility? 34 2.4.5 Happiness, Well-Being and the Emotional Basis of Utility 34 2.5 Conclusion and Summary 35 Questions 35 Notes 36 References 36 3 Discounting 39 3.1 Illustration and Structure 40 3.2 The Discounted Utility Model 40 3.2.1 Some Problems with the Discounted Utility Model 41 3.2.2 Evaluating Reallocations of Consumption by Equivalent Gains or Compensating Losses of Present Consumption 42 3.2.3 Delays and Speed-Ups of Utility 44 3.3 How and Why Discount Rates Vary 44 3.3.1 Discounting Single Outcomes Compared to Sequences of Outcomes 46 3.4 Investment Behaviour When Discount Rates are Declining: Investing in a ‘Golden Egg’ 47 3.5 Hyperbolic Discount Factors 49 3.6 Valuation by Using the Matching Law 51 3.6.1 On Pigeons and Men: Comparing Hyperbolic and Exponential Discounting 53 3.7 How Investment Decisions are Made When Discount Factors Decline Over Time 54 3.7.1 A Simple Example of a Sub-Game Perfect Equilibrium 55 3.7.2 The Properties of a Sub-Game Perfect Investment Strategy Equilibrium 57 3.7.3 How Do Declining Discount Rates Affect Investment Behaviour? 58 3.8 Conclusion and Summary 59 Appendix: Timely Choice: Euler Equations – Dynamics and Inter-Temporal Choice 60 Questions 61 Notes 62 References 62 4 Learning 65 4.1 Illustration and Structure 65 4.2 Rational Learning 66 4.2.1 Bayes’ Rule 66 4.2.2 Elements of Bayesian Revision 68 4.2.3 The Value of Stock Recommendations 70 4.3 Do We Learn the Bayesian Way? 72 4.3.1 Representativeness 74 4.3.2 Representation Bias in the Market: Analysts’ Overreaction to Earnings 74 4.3.3 A Once and For All Lesson? 75 4.4 Over Inference and the Law of Small Numbers 76 4.5 Disagreement, Tastes and the Capital Asset Pricing Model 77 4.6 Conclusion and Summary 79 Appendix: Case Study – Baseball the Bayesian Way 80 Questions 87 Notes 88 References 88 5 Bubbles 89 5.1 Illustration and Structure 90 5.2 Tulipmania and the Didactic Value of Bubbles 91 5.3 The Regulatory Origins of the Most Recent Bubble 92 5.3.1 Long-Term Capital Management 92 5.3.2 The Federal Reserve and Market Restraint 95 5.4 Bubbles: Past, Present and Future 101 5.4.1 Financial Bubbles and Infrastructure Technology 102 5.4.2 Are Bubbles Just Part of the Market Process? 103 5.5 The 1929 Stock-Market Crash 104 5.5.1 Early Signs 104 5.5.2 The Boom is On 105 5.5.3 Innovation and Speculation 106 5.5.4 Investment Trusts in the Boom’s Growth 106 5.5.5 The Final Implosion 107 5.6 Should Government Burst the Bubble? 108 5.7 Conclusion and Summary 109 Appendix: Tulips as Assets and Art 110 Questions 114 Notes 114 References 114 Part II Asset Pricing 117 6 Noise Traders 119 6.1 Illustration and Structure 120 6.2 The De Long, Shleifer, Summers and Waldmann Model 121 6.2.1 The Basic Set Up 122 6.2.2 Modelling Mispricing 122 6.2.3 What Investors Want 123 6.2.4 Choosing Optimal Asset Allocations Across the Safe and Risky Asset 124 6.2.5 The Pricing Equation 125 6.2.6 Will Noise Traders Die Out? 128 6.2.7 Decomposing Noise Traders’ Profits 130 6.3 Can Investors Get Emotional? 133 6.3.1 Feeling the Risk 134 6.3.2 The Affect Heuristic 135 6.3.3 Panic and Feedback Trading During the 1987 Stock-Market Crash 136 6.3.4 The Diminishing Roar of Noise 137 6.4 Conclusion and Summary 138 Questions 138 Notes 139 References 139 7 Overconfidence and Optimism 141 7.1 Illustration and Structure 142 7.2 A Model of Trading Amongst Optimistic Investors 142 7.2.1 The Model 143 7.2.2 Price Setting 143 7.2.3 Conditions for Overconfident Pricing of the Risky Asset 144 7.2.4 Pricing in Odean’s Model 147 7.2.5 The Implications of Odean’s Model for Financial Markets 150 7.3 Do Investors Trade Too Much? 150 7.3.1 Optimism in Corporate Finance 151 7.3.2 Facing Failure 151 7.3.3 Who Dares Loses? 153 7.3.4 The Hubris Theory of Takeovers 153 7.4 Conclusion and Summary 154 Appendix A: Hubris at Work: The AOL–Time Warner Merger 155 Appendix B: Derivation of Results in Odean’s Model 161 Questions 163 Notes 163 References 163 8 Asset Pricing under Prospect Theory 165 8.1 Illustration and Structure 165 8.2 The Basics of Prospect Theory 166 8.2.1 Prospect Theory’s Application to Finance 167 8.2.2 Benchmarks, Gains and Losses and the Dynamics of Utility under Prospect Theory 168 8.2.3 Integration or Segregation of Losses and Gains in the Presence of Loss Aversion 169 8.2.4 The Evolution of Investor Benchmarks 170 8.2.5 Price Formation in a Market Populated By Investors With Prospect Theory Utility Functions 171 8.2.6 Pricing in the Standard Inter-Temporal Consumption-Based Asset-Pricing Model or Economy I 171 8.3 Does Prospect Theory Work? 172 8.3.1 Can Prospect Theory Explain the Internet Bubble? 172 8.3.2 Can Prospect Theory Explain IPO Underpricing? 174 8.3.3 Prospect Theory Here, There and Everywhere 176 8.4 The Cumulative Probability Version of Prospect Theory 176 8.5 Does Cumulative Prospect Theory Work? 177 8.5.1 Cumulative Prospect Theory and Asset Pricing 179 8.6 Conclusion and Summary 181 Appendix: CARA Utility 181 Questions 182 Note 182 References 183 9 Overreaction and/or Underreaction 185 9.1 Illustration and Structure 185 9.2 The DHS Model 186 9.2.1 Reversals of Fortune 188 9.2.2 Pricing When Confidence Levels Depend on the Relation Between the Public and Private Signals 189 9.2.3 Investor Extrapolation and Reversals of Fortune 192 9.2.4 Many Theories in Search of a Decisive Verification 192 9.2.5 Momentum and Underreaction: Two Stock-Market Anomalies or One? 194 9.3 No News Is . . .? 194 9.3.1 The Jackson and Johnson (JJ) Model’s Message 195 9.3.2 How the JJ Model Works 196 9.3.3 Stock-Market Responses to News and No News 199 9.4 Conclusion and Summary 199 Questions 199 Note 199 References 200 10 Momentum 201 10.1 Illustration and Structure 201 10.2 Grinblatt and Han’s (2005) Model 203 10.2.1 Modelling Asset Demand in the GH Model 204 10.2.2 Investor Returns and the Evolution of the Reference Point 207 10.3 What Drives Stock-Market Momentum? 208 10.3.1 Evidence of PEAD 209 10.4 What Causes PEAD? 212 10.4.1 Is PEAD Due to Changes in Risk? 212 10.4.2 Are Prices Following Themselves or Following Earnings? 213 10.4.3 Is PEAD in the Market or in the Eye of the Researcher? 215 10.4.4 Show Me the Money 216 10.5 Conclusion and Summary 217 Questions 217 Note 218 References 218 11 Herding 221 11.1 Illustration and Structure 221 11.2 The FSS Model 222 11.2.1 The Basic Set Up 222 11.2.2 The Price-Setting Mechanism Used by Market-Makers 223 11.2.3 Informed Speculators’ Demands 224 11.3 Conformity as a Force for Social Good and Evil 228 11.3.1 Evidence on Herding and its Effect 229 11.3.2 Herding in Investment Advice 230 11.3.3 Words which Cannot be Spoken 230 11.3.4 Private Truths and Public Lies 231 11.3.5 The Herd in History 233 11.4 Conclusion and Summary 233 Appendix: The United States vs. Microsoft 234 Questions 236 Note 237 References 237 12 Insider Trading 239 12.1 Illustration and Structure 240 12.2 Insider Trading Here for Better or Worse 241 12.2.1 The Distributional Impact of Insider Trading 242 12.2.2 When does Trading become Insider Trading? 243 12.2.3 Insiders on Trial: Proof of Guilt or Innocence? 244 12.3 The Hirshleifer, Subrahmanyam and Titman Model 245 12.3.1 Asset Demands and the Determination of Investor’s Terminal Wealth in the HST Model 246 12.3.2 Pricing in Equilibrium 250 12.3.3 Trading Behaviour in Equilibrium 251 12.4 Insider Trading, Stock Options and the Construction of Earnings 255 12.4.1 Psychological Factors Determining the Exercise of Stock Options 256 12.5 Insider Trading and its Consequence for Outsiders 257 12.6 Conclusion and Summary 258 Appendix A: Why Don’t Later Informed Traders Trade in Period 1 in the HST Model? 258 Appendix B: Deriving Investor Demands as Linear Functions of the Random Variables Underpinning the Model 262 Questions 265 Notes 265 References 266 13 Equity Premium Puzzle 269 13.1 Illustration and Structure 269 13.2 The Puzzle 270 13.2.1 The Mehra and Prescott Statement of the Equity Premium Puzzle 271 13.2.2 Explaining the Risk Premium by Myopic Loss Aversion 272 13.2.3 Can Loss Aversion Explain the Puzzle? 274 13.3 Loss Aversion in a Reference-Dependent Utility Model 276 13.3.1 A Reference-Dependent Model of Investor Choice 277 13.3.2 Loss Aversion in a Reference-Dependent Model of Choice 277 13.3.3 Diminishing Sensitivity to Losses and Gains 278 13.3.4 Constant Risk Aversion and the Benartzi and Thaler (1995) Model 279 13.3.5 Is Loss Aversion Irrational? 280 13.4 Conclusion and Summary 280 Questions 281 References 281 Part III Corporate Finance 283 14 Incorporation 285 14.1 Illustration and Structure 285 14.2 Companies: Where did They Come from and Where will They Go? 286 14.2.1 Limited Liability: its Value and its Role in the Emergence of the Corporate Form 288 14.2.2 The Economic Rationale for Granting Limited Liability 288 14.3 Agency, Monitoring and Incorporation 289 14.3.1 Are Managers Agents or Team Members? 291 14.3.2 Psychological Barriers to Arm’s Length Contracting 294 14.3.3 Group Psychology on the Board, Building Consensus and its Dissimulation 294 14.4 Lions Led by Donkeys. Some Common Failings in Managerial Making 296 14.4.1 Clearing Out the ‘Inside View’ 297 14.4.2 Come On Down: the Satisfaction of Recognition 298 14.4.3 Facing Glory and Defeat: Managers’ Resistance to Recognizing Failure 298 14.4.4 Governance in the Long and Short Run 299 14.5 Conclusion and Summary 300 Appendix: Emperor Eisner – A Case Study in the Power of Personal Control in a Corporation 300 Questions 313 Notes 313 References 314 15 The Market for Information, Noise and Deception 317 15.1 Illustration and Structure 318 15.2 The Boundaries of the Market for Corporate Information 318 15.2.1 The Conduct of the Market for Corporate Information 319 15.3 What Do Analysts Do? 321 15.3.1 The Ivkovic and Jegadeesh (IJ) Model 322 15.4 Valuing Investment Advice 325 15.4.1 The Market for Corporate Information 326 15.4.2 What Type of Valuation Models do Analysts Use? 328 15.4.3 The Fragility of Valuation Models 330 15.4.4 A Dynamic Model of the Market for Financial Information 332 15.4.5 From Inside and Out: Isolation Bias and Risk Taking 333 15.5 Conclusion and Summary 333 Questions 334 Notes 334 References 334 16 Dividends 337 16.1 Illustration and Structure 337 16.2 The Irrelevance of Dividends to Value 338 16.2.1 The Puzzle of Dividend Policy 339 16.3 A Prospect Theory Explanation of Dividend Payments 340 16.3.1 Coding of Prospects: Combination, Segregation 341 16.3.2 Shop Until You Should Stop 341 16.3.3 Calculating the Dividend Yield Premium/Discount 342 16.4 Who Pays Dividends and Why? 346 16.4.1 Are Dividends Signals of Future Earnings Prospects? 346 16.4.2 Dividend Omissions, Initiations and Drift 347 16.4.3 What Reasons do Managers Give for Paying Dividends? 348 16.4.4 Does Pay-out Policy Matter? 349 16.5 Conclusion and Summary 350 Questions 350 Note 351 References 351 17 Entrepreneurship 353 17.1 Illustration and Structure 354 17.1.1 The Problem of Self-Control 354 17.2 The BT Model 355 17.2.1 The Demand for Self-Confidence in the BT Model 355 17.2.2 Always Wrong but Never in Doubt 359 17.2.3 The Supply of Self-Confidence in the BT Model 359 17.2.4 Numerical Illustration of the BT Model 361 17.3 Is Deluding Yourself Worth it? 362 17.3.1 Optimism, Self-Control and Society 363 17.3.2 The Social Benefits of the Maverick Entrepreneur 363 17.4 Conclusion and Summary 364 Appendix: Entrepreneurs and the BT Model – Some Case Studies 364 Questions 370 Notes 370 References 371 Part IV The Professions 373 18 Analysts’ Conflicts of Interest 375 18.1 Illustration and Structure 376 18.2 Evidence of Conflicts of Interest from Empirical Studies 377 18.2.1 No Conflict, No Interest 378 18.2.2 Is Disclosure of a Conflict of Interest Sufficient Protection for Investors? 379 18.2.3 Conflicts in the Laboratory 379 18.3 Regulating Conflicts of Interest 380 18.3.1 UK Policy on Conflicts of Interest 380 18.3.2 EU Policy on Conflicts of Interest 382 18.3.3 US Policy on Conflicts of Interest 383 18.3.4 The Common Law of Conflicts of Interest 383 18.3.5 The Dura Pharmaceuticals Case 384 18.3.6 Market Efficiency, Conflicts of Interest and the Courts 385 18.4 Conclusion and Summary 385 Questions 386 Notes 386 References 386 19 Accounting Reform 389 19.1 Illustration and Structure 389 19.2 The Onward March of ‘Fair-Value’ Accounting 390 19.2.1 Historic Cost versus Fair Value 390 19.2.2 A Return to Fundamental Valuation 392 19.3 An Accounting-Based Valuation Model 392 19.3.1 Are All Reported Earnings Additions to Shareholder Value? 394 19.3.2 The Dynamics of Abnormal Earnings Valuation 395 19.3.3 Some Examples of the Ohlson Model in Action 396 19.3.4 Implications for Price 398 19.3.5 Implications for Returns 400 19.3.6 Does the Ohlson Model Work? 400 19.3.7 Earnings Persistence in the Ohlson Model 403 19.3.8 Other Information in the Ohlson Model 403 19.4 Behavioural Bias in Estimates of the Ohlson Model 404 19.4.1 Inferring Value from Accounting Data: Fair Values versus Historic Costs 405 19.4.2 The Three Levels of Fair Value 406 19.4.3 Some Implicit Trade-Offs in Fair-Value Accounting 406 19.5 Conclusion and Summary 407 Appendix A: Mark-to-Market Accounting at Enron – A Case Study 407 Appendix B: Solving for Price in Terms of Abnormal Earnings and Non-Accounting Information only (Equation (19.7)) 423 Questions 425 Notes 425 References 426 20 Conclusion 427 Index 431

Read more less

Book SynopsisMathematical techniques for trading and risk management. Managing Energy Risk closes the gap between modern techniques from financial mathematics and the practical implementation for trading and risk management. It takes a multi-commodity approach that covers the mutual influences of the markets for fuels, emission certificates, and power.Table of ContentsForeword. Preface. 1 Energy Markets. 1.1 The oil market. 1.1.1 Consumption, production and reserves. 1.1.2 Crude oil trading. 1.1.3 Refined oil products. 1.2 The natural gas market. 1.2.1 Consumption, production and reserves. 1.2.2 Natural gas trading. 1.2.3 Price formulas with oil indexation. 1.2.4 Liquefied natural gas. 1.3 The coal market. 1.3.1 Consumption, production and reserves. 1.3.2 Coal trading. 1.3.3 Freight. 1.3.4 Coal subsidies in Germany: BAFA-indexed prices. 1.4 The electricity market. 1.4.1 Consumption and production. 1.4.2 Electricity trading. 1.4.3 Products in the electricity markets. 1.4.4 Energy exchanges. 1.5 The emissions market. 1.5.1 Kyoto Protocol. 1.5.2 EU emissions trading scheme. 1.5.3 Flexible mechanisms. 1.5.4 Products and market places. 1.5.5 Emissions trading in North America. 2 Energy Derivatives. 2.1 Forwards, futures and swaps. 2.1.1 Forward contracts. 2.1.2 Futures contracts. 2.1.3 Swaps. 2.2 “Plain vanilla” options. 2.2.1 The put–call parity and option strategies. 2.2.2 Black’s futures price model. 2.2.3 Option pricing formulas. 2.2.4 Hedging options: the “Greeks”. 2.2.5 Implied volatilities and the “volatility smile”. 2.2.6 Swaptions. 2.3 American and Asian options. 2.3.1 American options. 2.3.2 Asian options. 2.4 Commodity bonds and loans. 2.5 Multi-underlying options. 2.5.1 Basket options. 2.5.2 Spread options. 2.5.3 Quanto and composite options. 2.6 Spot price options. 2.6.1 Pricing spot price options. 2.6.2 Caps and floors. 2.6.3 Swing options. 2.6.4 Virtual storage. 3 Commodity Price Models. 3.1 Forward curves and the market price of risk. 3.1.1 Investment assets. 3.1.2 Consumption assets and convenience yield. 3.1.3 Contango, backwardation and seasonality. 3.1.4 The market price of risk. 3.1.5 Derivatives pricing and the risk-neutral measure. 3.2 Commodity spot price models. 3.2.1 Geometric Brownian motion. 3.2.2 The one-factor Schwartz model. 3.2.3 The Schwartz–Smith model. 3.3 Stochastic forward curve models. 3.3.1 One-factor forward curve models. 3.3.2 A two-factor forward curve model. 3.3.3 A multi-factor exponential model. 3.4 Electricity price models. 3.4.1 The hourly forward curve. 3.4.2 The SMaPS model. 3.4.3 Regime-switching model. 3.5 Multi-commodity models. 3.5.1 Regression analysis. 3.5.2 Correlation analysis. 3.5.3 Cointegration. 3.5.4 Model building. 4 Fundamental Market Models. 4.1 Fundamental price drivers in electricity markets. 4.1.1 Demand side. 4.1.2 Supply side. 4.1.3 Interconnections. 4.2 Economic power plant dispatch. 4.2.1 Thermal power plants. 4.2.2 Hydro power plants. 4.2.3 Optimisation methods. 4.3 Methodological approaches. 4.3.1 Merit order curve. 4.3.2 Optimisation models. 4.3.3 System dynamics. 4.3.4 Game theory. 4.4 Relevant system information for electricity market modelling. 4.4.1 Demand side. 4.4.2 Supply side. 4.4.3 Transmission system. 4.4.4 Historical data for backtesting. 4.4.5 Information sources. 4.5 Application of electricity market models. 4.6 Gas market models. 4.6.1 Demand side. 4.6.2 Supply side. 4.6.3 Transport. 4.6.4 Storage. 4.6.5 Portfolio optimisation. 4.6.6 Formulation of the market model. 4.6.7 Application of gas market models. 4.7 Market models for oil, coal, and CO2 markets. 5 Electricity Retail Products. 5.1 Interaction of wholesale and retail markets. 5.2 Retail products. 5.2.1 Common full service contracts. 5.2.2 Indexed contracts. 5.2.3 Partial delivery contracts. 5.2.4 Portfolio management. 5.2.5 Supplementary products. 5.3 Sourcing. 5.3.1 Business-to-business (B2B). 5.3.2 Business-to-consumer (B2C). 5.3.3 Small accounts. 5.3.4 Municipalities and reseller. 5.4 Load forecasting. 5.5 Risk premium. 5.5.1 Price validity period. 5.5.2 Balancing power. 5.5.3 Credit risk. 5.5.4 Price–volume correlation. 5.5.5 Strict risk premiums. 5.5.6 Hourly price profile risk. 5.5.7 Volume risk. 5.5.8 Operational risk. 5.5.9 Risk premium summary. 6 Risk Management. 6.1 Market price exposure. 6.1.1 Delta position. 6.1.2 Variance minimising hedging. 6.2 Value-at-Risk and further risk measures. 6.2.1 Definition of Value-at-Risk. 6.2.2 Parameters of the Value-at-Risk measure. 6.2.3 Computation methods. 6.2.4 Liquidity-adjusted Value-at-Risk. 6.2.5 Estimating volatilities and correlations. 6.2.6 Backtesting. 6.2.7 Further risk measures. 6.3 Credit risk. 6.3.1 Legal risk. 6.3.2 Quantifying credit risk. 6.3.3 Credit rating. Appendices. A Mathematical background. A.1 Econometric methods. A.1.1 Linear regression. A.1.2 Stationary time series and unit root tests. A.1.3 Principal component analysis. A.1.4 Kalman filtering method. A.1.5 Regime-switching models. A.2 Stochastic processes. A.2.1 Conditional expectation and martingales. A.2.2 Brownian motion. A.2.3 Stochastic integration and Itô’s lemma. A.2.4 The Feynman–Kac theorem. A.2.5 Monte Carlo simulation. Bibliography. Index.

Read more less

Book SynopsisRisk Management and Shareholders' Value in Banking covers all main aspects of risk management, capital management and value creation for financial institutions; it is structured in six parts. Part One covers the measurement and management of the interest rate risk on all assets and liabilities of a banking institution.Table of ContentsForeword. Motivation and Scope of this Book: A Quick Guided Tour. PART I INTEREST RATE RISK. Introduction to Part I. 1 The Repricing Gap Model. 1.1 Introduction. 1.2 The gap concept. 1.3 The maturity-adjusted gap. 1.4 Marginal and cumulative gaps. 1.5 The limitations of the repricing gap model. 1.6 Some possible solutions. 1.6.1 Non-uniform rate changes: the standardized gap. 1.6.2 Changes in rates of on-demand instruments. 1.6.3 Price and quantity interaction. 1.6.4 Effects on the value of assets and liabilities. Selected Questions and Exercises. Appendix 1A The Term Structure of Interest Rates. Appendix 1B Forward Rates. 2 The Duration Gap Model. 2.1 Introduction. 2.2 Towards mark-to-market accounting. 2.3 The duration of financial instruments. 2.3.1 Duration as a weighted average of maturities. 2.3.2 Duration as an indicator of sensitivity to interest rates charges. 2.3.3 The properties of duration. 2.4 Estimating the duration gap. 2.5 Problems of the duration gap model. Selected Questions and Exercises. Appendix 2A The Limits of Duration. 3 Models Based on Cash-Flow Mapping. 3.1 Introduction. 3.2 The objectives of cash-flow mapping and term structure. 3.3 Choosing the vertices of the term structure. 3.4 Techniques based on discrete intervals. 3.4.1 The duration intervals method. 3.4.2 The modified residual life method. 3.4.3 The Basel Committee method. 3.5 Clumping. 3.5.1 Structure of the methodology. 3.5.2 An example. 3.5.3 Clumping on the basis of price volatility. 3.6 Concluding comments. Selected Questions and Exercises. Appendix 3A Estimating the Zero-coupon Curve. 4 Internal Transfer Rates. 4.1 Introduction. 4.2 Building an ITR system: a simplified example. 4.3 Single and multiple ITRs. 4.4 Setting internal interest transfer rates. 4.4.1 ITRs for fixed-rate transactions. 4.4.2 ITRs for floating-rate transactions. 4.4.3 ITRs for transactions indexed at “non-market” rates. 4.5 ITRs for transactions with embedded options. 4.5.1 Option to convert from a fixed to a floating rate. 4.5.2 Floating rate loan subject to a cap. 4.5.3 Floating rate loan subject to a floor. 4.5.4 Floating rate loan subject to both a floor and a cap. 4.5.5 Option for early repayment. 4.6 Summary: the ideal features of an ITR system. Selected Questions and Exercises. Appendix 4A Derivative Contracts on Interest Rates. PART II MARKET RISKS. Introduction to Part II. 5 The Variance-Covariance Approach. 5.1 Introduction. 5.2 VaR derivation assuming normal return distribution. 5.2.1 A simplified example. 5.2.2 Confidence level selection. 5.2.3 Selection of the time horizon. 5.3 Sensitivity of portfolio positions to market factors. 5.3.1 A more general example. 5.3.2 Portfolio VaR. 5.3.3 Delta-normal and asset-normal approaches. 5.4 Mapping of risk positions. 5.4.1 Mapping of foreign currency bonds. 5.4.2 Mapping of forward currency positions. 5.4.3 Mapping of forward rate agreements. 5.4.4 Mapping of stock positions. 5.4.5 Mapping of bonds. 5.5 Summary of the variance-covariance approach and main limitations. 5.5.1 The normal distribution hypothesis. 5.5.2 Serial independence and stability of the variance-covariance matrix. 5.5.3 The linear payoff hypothesis and the delta/gamma approach. Selected Questions and Exercises. Appendix 5A Stockmarket Betas. 6 Volatility Estimation Models. 6.1 Introduction. 6.2 Volatility estimation based upon historical data: simple moving averages. 6.3 Volatility estimation based upon historical data: exponential moving averages. 6.4 Volatility prediction: GARCH models. 6.5 Volatility prediction: implied volatility. 6.6 Covariance and correlation estimation. Selected Questions and Exercises. 7 Simulation Models. 7.1 Introduction. 7.2 Historical simulations. 7.2.1 A first example: the VaR of a single position. 7.2.2 Estimation of a portfolio’s VaR. 7.2.3 A comparison between historical simulations and the. variance-covariance approach. 7.2.4 Merits and limitations of the historical simulation method. 7.2.5 The hybrid approach. 7.2.6 Bootstrapping and path generation. 7.2.7 Filtered historical simulations. 7.3 Monte Carlo simulations. 7.3.1 Estimating the VaR of a single position. 7.3.2 Estimating portfolio VaR. 7.3.3 Merits and limitations of Monte Carlo simulations. 7.4 Stress testing. Selected Questions and Exercises. 8 Evaluating VaR Models. 8.1 Introduction. 8.2 An example of backtesting: a stock portfolio VaR. 8.3 Alternative VaR model backtesting techniques. 8.3.1 The unconditional coverage test. 8.3.2 The conditional coverage test. 8.3.3 Lopez test based upon a loss function. 8.3.4 Tests based upon the entire distributio. Selected Questions and Exercises. Appendix 8A VaR Model Backtesting According to the Basel Committee. 9 VaR Models: Summary, Applications and Limitations. 9.1 Introduction. 9.2 A summary overview of the different models. 9.3 Applications of VaR models. 9.3.1 Comparison among different risks. 9.3.2 Determination of risk taking limits. 9.3.3 The construction of risk-adjusted performance (RAP) measures. 9.4 Six “false shortcomings” of VaR. 9.4.1 VaR models disregard exceptional events. 9.4.2 VaR models disregard customer relations. 9.4.3 VaR models are based upon unrealistic assumptions. 9.4.4 VaR models generate diverging results. 9.4.5 VaR models amplify market instability. 9.4.6 VaR measures “come too late, when damage has already been done”. 9.5 Two real problems of VaR models. 9.5.1 The size of losses. 9.5.2 Non-subadditivity. 9.6 An alternative risk measure: expected shortfall (ES). Selected Questions and Exercises. Appendix 9A Extreme Value Theory. PART III CREDIT RISK. Introduction to Part III. 10 Credit-Scoring Models. 10.1 Introduction. 10.2 Linear discriminant analysis. 10.2.1 The discriminant function. 10.2.2 Wilks’ Lambada. 10.2.3 Altman’s Z-score. 10.2.4 From the score to the probability of default. 10.2.5 The cost of errors. 10.2.6 The selection of discriminant variables. 10.2.7 Some hypotheses underlying discriminant analysis. 10.3 Regression models. 10.3.1 The linear probabilistic model. 10.3.2 The logit and probit models. 10.4 Inductive models. 10.4.1 Neural networks. 10.4.2 Genetic algorithms. 10.5 Uses, limitations and problems of credit-scoring models. Selected Questions and Exercises. Appendix 10A The Estimation of the Gamma Coefficients in Linear. Discriminant Analysis. 11 Capital Market Models. 11.1 Introduction. 11.2 The approach based on corporate bond spreads. 11.2.1 Foreword: continuously compounded interest rates. 11.2.2 Estimating the one-year probability of default. 11.2.3 Probabilities of default beyond one year. 11.2.4 An alternative approach. 11.2.5 Benefits and limitations of the approach based on corporate. bond spreads. 11.3 Structural models based on stock prices. 11.3.1 An introduction to structural models. 11.3.2 Merton’s model: general structure. 11.3.3 Merton’s model: the role of contingent claims analysis. 11.3.4 Merton’s model: loan value and equilibrium spread. 11.3.5 Merton’s model: probability of default. 11.3.6 The term structure of credit spreads and default probabilities. 11.3.7 Strengths and limitations of Merton’s model. 11.3.8 The KMV model for calculating Vo and ov. 11.3.9 The KMV approach and the calculation of PD. 11.3.10 Benfits and limitations of the KMV model. Selected Questions and Exercises. Appendix 11A Calculating the Fair Spread on a Loan. Appendix 11B Real and Risk-Neutral Probabilities of Default. 12 LGD and Recovery Risk. 12.1 Introduction. 12.2 What factors drive recovery rates? 12.3 The estimation of recovery rates. 12.3.1 Market LGD and default LGD. 12.3.2 Computing workout LGDs. 12.4 From past data to LGD estimates. 12.5 Results from selected empirical studies. 12.6 Recovery risk. 12.7 The link between default risk and recovery risk. Selected Questions and Exercises. Appendix 12A The Relationship Between PD and RR in the Merton Model. 13 Rating Systems. 13.1 Introduction. 13.2 Rating assignment. 13.2.1 Internal ratings and agency ratings: how do they differ? 13.2.2 The assignment of agency ratings. 13.2.3 Rating assessment in bank internal rating systems. 13.3 Rating quantification. 13.3.1 The possible approaches. 13.3.2 The actuarial approach: marginal, cumulative and annualized default rates. 13.3.3 The actuarial approach: migration rates. 13.4 Rating validation. 13.4.1 Some qualitative data. 13.4.2 Quantitative criteria for validating rating assignments. 13.4.3 The validation of the rating quantification step. Selected Questions and Exercises. 14 Portfolio Models. 14.1 Introduction. 14.2 Selecting time horizon and confidence level. 14.2.1 The choice of risk horizon. 14.2.2 The choice of the confidence level. 14.3 The migration approach: CreditMetrics TM. 14.3.1 Estimating risk on a single credit. 14.3.2 Estimating the risk of a two-exposure portfolio. 14.3.3 Estimating asset correlation. 14.3.4 Application to a portfolio of N positions. 14.3.5 Merits and limitations of the CreditMetrics TM model. 14.4 The structural approach: PortfolioManager TM. 14.5 The macroeconomic approach: CreditPortfolioView TM. 14.5.1 Estimating conditional default probabilities. 14.5.2 Estimating the conditional transition matrix. 14.5.3 Merits and limitations of CreditPortfolioView TM. 14.6 The actuarial approach: the CreditRisk+ TM model. 14.6.1 Estimating the probability distribution of defaults. 14.6.2 The probability distribution of losses. 14.6.3 The distribution of losses of the entire portfolio. 14.6.4 Uncertainty about the average default rate and correlations. 14.6.5 Merits and limitations of CreditRisk+ TM. 14.7 A brief comparison of the main models. 14.8 Some limitations of the credit risk models. 14.8.1 The treatment of recovery risk. 14.8.2 The assumption of independence between exposure risk and. default risk. 14.8.3 The assumption of independence between credit risk and market risk. 14.8.4 The impossibility of backtesting. Selected Questions and Exercises. Appendix 14A Asset Correlation Versus Default Correlation. 15 Some Applications of Credit Risk Measurement Models. 15.1 Introduction. 15.2 Loan pricing. 15.2.1 The cost of the expected loss. 15.2.2 The cost of economic capital absorbed by unexpected losses. 15.3 Risk-adjusted performance measurement. 15.4 Setting limits on risk-taking units. 15.5 Optimizing the composition of the loan portfolio. Selected Questions and Exercises. Appendix 15A Credit Risk Transfer Tools. 16 Counterparty Risk on OTC Derivatives. 16.1 Introduction. 16.2 Settlement and pre-settlement risk. 16.3 Estimating pre-settlement risk. 16.3.1 Two approaches suggested by the Basel Committee (1988). 16.3.2 A more sophisticated approach. 16.3.3 Estimating the loan equivalent exposure of an interest rate swap. 16.3.4 Amortization and diffusion effect. 16.3.5 Peak exposure (OE) and average expected exposure (AEE). 16.3.6 Further approaches to LEE computation. 16.3.7 Loan equivalent and Value at Risk: analogies and differences. 16.4 Risk-adjusted performance measurement. 16.5 Risk-mitigation tools for pre-settlement risk. 16.5.1 Bilateral netting agreements. 16.5.2 Safety margins. 16.5.3 Recouponing and guarantees. 16.5.4 Credit triggers and early redemption options. PART IV OPERATIONAL RISK. Introduction to Part IV. 17 Operational Risk: Definition, Measurement and Management. 17.1 Introduction. 17.2 OR: how can we define it? 17.2.1 OR risk factors. 17.2.2 Some peculiarities of OR. 17.3 Measuring OR. 17.3.1 Identifying the risk factors. 17.3.2 Mapping business units and estimating risk exposure. 17.3.3 Estimating the probability of the risky events. 17.3.4 Estimating the losses. 17.3.5 Estimating expected loss. 17.3.6 Estimating unexpected loss. 17.3.7 Estimating capital at risk against OR. 17.4 Towards an OR management system. 17.5 Final remarks. Selected Questions and Exercises. Appendix 17A OR Measurement and EVT. PART V REGULATORY CAPITAL REQUIREMENTS. Introduction to Part V. 18 The 1988 Capital Accord. 18.1 Introduction. 18.2 The capital ratio. 18.2.1 Regulatory capital (RC). 18.2.1.1 Tier 1 capital. 18.2.1.2 Supplementary capital (Tier 2 and Tier 3). 18.2.2 Risk weights (wi). 18.2.3 Assets included in the capital ration (Ai). 18.3 Shortcomings of the capital adequacy framework. 18.3.1 Focus on credit risk only. 18.3.2 Poor differentiation of risk. 18.3.3 Limited recognition of the link between maturity and credit risk. 18.3.4 Disregard for portfolio diversification. 18.3.5 Limited recognition of risk mitigation tools. 18.3.6 “Regulatory arbitrage”. 18.4 Conclusions. Selected Questions and Exercises. Appendix 18A The Basel Committee. 19 The Capital Requirements for Market Risks. 19.1 Introduction. 19.2 Origins and characteristics of capital requirements. 19.2.1 Origins of the requirements. 19.2.2 Logic and scope of application. 19.2.3 The “building blocks” approach. 19.2.4 Tier 3 capital. 19.3 The capital requirements on debt securities. 19.3.1 The requirement for specific risk. 19.3.2 The requirement for generic risk. 19.4 Positions in equity securities: specific and generic requirements. 19.5 The requirement for positions in foreign currencies. 19.6 The requirement for commodity positions. 19.7 The use of internal models. 19.7.1 Criticism of the Basel Committee proposals. 19.7.2 The 1995 revised draft. 19.7.3 The final amendment of January 1996. 19.7.4 Advantages and limitations of the internal model approach. 19.7.5 The pre-commitment approach. Selected Questions and Answers. Appendix 19A Capital requirements Related to Settlement, Counterparty and Concentration Risks. 20 The New Basel Accord. 20.1 Introduction. 20.2 Goals and contents of the reform. 20.3 Pillar One: the standard approach to credit risk. 20.3.1 Risk weighting. 20.3.2 Collateral and guarantees. 20.4 The internal ratings-based approach. 20.4.1 Risk factors. 20.4.2 Minimum requirements of the internal ratings system. 20.4.3 From the rating system to the minimum capital requirements. 20.5 Pillar two: a new role for supervisory authorities. 20.6 Pillar three: market discipline. 20.6.1 The rationale underlying market discipline. 20.6.2 The reporting obligations required by the Basel Committee. 20.6.3 Other necessary conditions for market discipline. 20.7 Pros and cons of Basel II. 20.8 The Impact of Basel II. 20.8.1 The impact on first implementation. 20.8.2 The dynamic impact: procyclicality. Selected Questions and Exercises. 21 Capital Requirements on Operational Risk. 21.1 Introduction. 21.2 The capital requirement on operational risk. 21.2.1 The basic indicator approach. 21.2.2 The standardized approach. 21.2.3 The requirements for adopting the standardized approach. 21.2.4 Advanced measurement approaches. 21.2.5 The requirements for adopting advanced approaches. 21.2.6 The role of the second and third pillars. 21.2.7 The role of insurance coverage. 21.3 Weaknesses of the 2004 Accord. 21.4 Final remarks. Selected Questions and Exercises. PART VI CAPITAL MANAGEMENT AND VALUE CREATION. Introduction to Part VI. 22 Capital Management. 22.1 Introduction. 22.2 Defining and measuring capital. 22.2.1 The definition of capital. 22.2.2 The relationship between economic capital and available capital. 22.2.3 Calculating a bank’s economic capital. 22.2.4 The relationship between economic capital and regulatory capital. 22.2.5 The limitation of regulatory capital: implications on pricing and. performance measurement. 22.2.6 The determinants of capitalization. 22.3 Optimizing regulatory capital. 22.3.1 Technical features of the different regulatory capital requirements. 22.3.2 The actual use of the various instruments included within regulatory capital. 22.4 Other instruments not included within regulatory capital. 22.4.1 Insurance capital. 22.4.2 Contingent capital. Selected Questions and Exercises. 23 Capital Allocation. 23.1 Introduction. 23.2 Measuring capital for the individual business units. 23.2.1 The “benchmark capital” approach. 23.2.2 The model-based approach. 23.2.3 The Earnings-at-Risk (EaR) approach. 23.3 The relationship between allocated capital and total capital. 23.3.1 The concept of diversified capital. 23.3.2 Calculating diversified capital. 23.3.3 Calculating the correlations used in determining diversified capital. 23.4 Capital allocated and capital absorbed. 23.5 Calculating risk-adjusted performance. 23.6 Optimizing the allocation of capital. 23.6.1 A model for optimal capital allocation. 23.6.2 A more realistic model. 23.7 The organizational aspects of the capital allocation process. Selected Questions and Exercises. Appendix 23A The Correlation Approach. Appendix 23B The Virtual nature of Capital Allocation. 24 Cost of Capital and Value Creation. 24.1 Introduction. 24.2 The link between risk management and capital budgeting. 24.3 Capital budgeting in banks and non-financial enterprises. 24.4 Estimating the cost of capital. 24.4.1 Estimating the cost of capital. 24.4.2 The method based on the price/earnings ratio. 24.4.3 The method based on the Capital Asset Pricing Model (CAPM). 24.4.4 Caveats. 24.5 Some empirical examples. 24.6 Value creation and RAROC. 24.7 Value creation and EVA. 24.8 Conclusions. Selected Questions and Exercises. Bibliography. Index.

Read more less

Book Synopsis.

Read more less

Book SynopsisEquity Valuation: Models from the Leading Investment Banks is a clear and reader-friendly guide to how today's leading investment banks analyze firms.Table of ContentsForeword. Preface. Acknowledgments. Abbreviations. Part I: Discounted Cash Flow (DCF) Models (Jan Viebig and Thorsten Poddig). 1. Introduction. 2. The Fundamental Value of Stocks and Bonds. 3. Discounted Cash Flow Models: The Main Input Factors. Part II: Monte Carlo Free Cash Flow to the Firm (MC-FCFF) Models (Deutsche Bank/DWS) (Jan Viebig and Thorsten Poddig). 4. Introduction. 5. Standard FCFF Model. 6. Monte Carlo FCFF Models. Part III: Beyond Earnings: A User's Guide to Excess Return Models and the HOLT CFROI® Framework (Tom Larsen and David Holland). 7. Introduction. 8. From Accounting to Economics - Part I. 9. From Economics to Valuation - Part I. 10. Where Does Accounting Go Wrong? 11. From Accounting to Economics: CFROI. 12. From Accounting to Economics: Economic Profit. 13. From Economics to Valuation - Part II. Appendix1. Vodafone Financial Statements and Relevant Notes for CFROI Calculation. Appendix 2: Additional Notes from Vodafone Annual Report for EP Calculation. Part IV: Morgan Stanley ModelWare's Approach to Intrinsic Value: Focusing on Risk-Reward Trade-Offs (Trevor S. Harris, Juliet Estridge and Doron Nissim). 14. Introduction. 15. Linking Fundamental Analysis to the Inputs of the Valuation Model. 16. Our Valuation Framework. 17. Linking Business Activity to Intrinsic Value Approach: The ModelWare Profitability Tree. 18. ModelWare's Instrinsic Value Approach. 19. Treatment of Key Inputs. 20. The Cost of Capital. 21. Summary and Conclusions. Appendix. Part V: UBS VCAM and EGW Regression-based Valuation (David Bianco). 22. Introducing "EGQ" - Where Intrinsic Methods and Empirical Techniques Meet. 23. A Quick Guide to DCF and Economic Profit Analysis. 24. Regression-based Valuation. 25. UBS Economic Growth Quotient. 26. UBS EGQ Regression Valuation. 27. Understanding Regressions. 28. Appendix Discussions. Part VI: Leverage Buyout (LBO) Models (Jan Viebig, Daniel Stillit and Thorsten Poddig). 29. Introduction. 30. Leveraged Buyouts. 31. IRRs and the Structure of LBO Models. 32. Assumptions of LBO Models. 33. Example: Continental AG. 34. A Word of Caution. Part VII: Valuation 101: Approaches and Alternatives (Aswath Damodaran). 35. Introduction. 36. Overview of Valuation. 37. Discounted Cash Flow Valuation. 38. Liquidation and Accounting Valuation. 39. Relative Valuation. 40. Real Option valuation. 41. Closing Thoughts on Value Enhancement. Part VIII: Final Thoughts on Valuation (Armin Varmaz, Thorsten Poddig and Jan Viebig). 42. Introduction. 43. Valuation in Theory: The Valuation of a Single Asset. 44. Outlook: The Multi-asset Valuation and Allocation Case. 45. Summary. Index.

Read more less

Book SynopsisThis book is a practical guide for private equity investors. It sets out a framework for understanding, assessing and managing the risks associated with senior management during the due diligence process of an acquisition. This provides an essential input into the wider due diligence review and a sound basis for managing the investment after the deal has been done so as to maximise the chances of a successful exit. The book comes at a time of significant growth in the field of private equity. In the UK over 3 million people (around 18% of all private sector employees) now work for private equity backed companies. It is estimated that European funds currently have somewhere between #200 and #300 billion to invest over the next few years. In the US, the whole issue of private equity due diligence is much more advanced but it is still likely that due diligence will remain a significant issue for private equity investors for the foreseeable future.Table of ContentsIntroduction. 1 The Landscape of Leadership Risk. 2 Overview of the leadership risk MAPPING framework. 3 Planning and Preparation. 4 Deciding what to Assess at an Individual Level. 5 Conducting Assessments at an Individual Level. 6 What to Assess at Team Level. 7 Assessing at a Team Level. 8 What to Assess at an Organisational Level. 9 Conducting Assessment at an Organisational Level. 10 The Review Phase. 11 The Address Phase. 12 Third Party Service Providers and Their Approaches.

Read more less

Book SynopsisAnti-Money Laundering is the definitive reference on money laundering and practice. First an outline will be given of the general approach taken by supra-national organisations like the United Nations and the European Council. Next the approach taken by international organisations and initiatives on the basis of the supra-national initiatives will be outlined by senior members of those organisations. A number of countries will then describe their specific prevention legislation. Countries involved will all be member-countries of the FATF (Financial Action Task Force on Money Laundering). Finally there will be an overview to enable the reader to make a comparison between the most important topics of money laundering legislation and rules in the different countries.Table of ContentsAcknowledgements. Alliance partners. About this book. About the editors. Foreword. Professor Kader Asmal, President FATF 2005-2006. Anti-Money Laundering – A short history. Wouter H. Muller, editor, Zurich. INTERNATIONAL ISSUES. Compliance and AML – Standards, education and training. William B. Howarth, president ICA, Birmingham (UK). Anti-Money Laundering Regulation and Trusts. Martyn Frost, STEP Deputy Chairman, Oldham (UK). INTERNATIONAL ORGANIZATIONS AND INITIATIVES. The United Nations Security Council and the effort to combat money laundering and the financing of terrorism. Joel Sollier, UNSC Counter-Terrorism Committee, New York. UN Anti-Money Laundering Initiatives. Rick McDonnell, UNODC, Vienna. Initiatives of the European Commission. Franco Frattini, EU Commission, Brussels (Belgium). The Financial Action Task Force. Alain Damais, Executive Secretary FATF, Paris (France). The Egmont Group. Wouter H. Muller (editor), Zurich. The Wolfsberg Process. Mark Pieth, University of Basel. COUNTRIES. The Americas. USA. John W. Moscow, Rosner Moscow & Napierala LLP, New York. Canada. Nancy J. Carroll & Barbara A. McIsaac, McCarthy Tétrault, Toronto/Ottawa (Ontario). Panama. Ricardo M. Alba & Eloy Alfaro de Alba, Tapia, Linares & Alfaro, Panama City. Argentina. Sebastian A. Soler, Marval, O'Farrell & Mairal, Buenos Aires. Brazil. Eliana Maria Filipozzi, Noronha Advogados, London. Robert Ellis Williams, Noronha Advogados, São Paulo. Uruguay. Fabian Rivero, Estudio Bergstein, Montevideo. Ady Beitler, Montevideo. Chile. Cristóbal Eyzaguirre, Felipe Dalgalarrando & Patricio Middleton, Claro y Cia., Santiago de Chile. Bahamas, Bermuda and Caribbean. Bermuda. Craig W. MacIntyre, Conyers Dill & Pearman, Hamilton. Bahamas. Cheryl E. Bazard & Tanya C. McCartney, Bahamas Association of Compliance Officers, Nassau. Cayman Islands. Martin Livingston, Maples & Calder, Grand Cayman. British Virgin Islands. Craig W. MacIntyre, Conyers Dill & Pearman. Barbados. Carolyn Hanson, ICA and Barbados Association of Compliance Professionals Christ Church, Barbados. Netherlands Antilles and Aruba. Aede Gerbranda, Smeets Thesseling van Bokhorst, Curaçao/Amsterdam. St. Kitts and Nevis. Shawna Lake & Idris Fidela Clarke, Ministry of Finance, Basseterre, St. Kitts. Europe. Switzerland. Judith Schmidt, Swiss Money Laundering Control Authority, Berne. Liechtenstein. Johannes Gasser & Markus Schwingshackl, Advokaturbüro Dr. Dr. Batliner & Dr. Gasser, Vaduz. Austria. Thomas Schirmer & Markus Uitz, Binder Grösswang Rechtsanwälte, Vienna. United Kingdom. Peter Burrell & Kate Meakin, Herbert Smith LLP, London. Jersey. Andrew le Brun, Jersey Financial Services Commission, St. Helier, Jersey. Cyprus. David Stokes, Andreas Neocleous & Co, Limassol. Isle of Man. Nick Verardi & Marc Conway, Dickinson Cruickshank, Douglas (IoM). Ireland. John Handoll, William Fry Solicitors, Dublin. Germany. Olaf Otting, Gleiss Lutz, Frankfurt/Main. France. Philippe Blaquier-Cirelli & Pierre-Yves Couturier, Jeantet Associés, Avocats à la Cour, Paris. Monaco. Donald Manasse & Sophie Marquet, Donald Manasse Law Offices, Monaco. Spain. Javier García Sanz & Guillermo San Pedro, Uría Menéndez, Madrid. Italy. Alberto Giampietri & Paolo Iemma, Gianni Origoni Grippo & Partners, Rome/Milan. Greece. D. Karamagiolis, Tsibanoulis & Partners, Athens. Belgium. Françoise Lefèvre & Olivier Praet, Linklaters de Bandt, Brussels. Netherlands. Enide Perez & Max Vermeij, Stibbe Advocaten, Amsterdam. Luxembourg. Pit Reckinger, Elvinger, Hoss & Prussen, Avocats à la Cour, Luxembourg. Russian Federation. Valery Tutykhin, John Tiner & Partners, Moscow. Ukraine. Dmytro Korbut, Andreas Neocleous & Co, Kiev. Middle East. United Arab Emirates. Messrs Graham Lovett & Charles Barwick, Clifford Chance, Dubai (UAE). Asia Pacific. Singapore. Chee Fang Theng, KhattarWong Advocates & Solicitors, Singapore. Japan. Takashi Nakazaki, Anderson Mori Tomotsune, Tokyo. China. Donna Li, AllBright Law Offices, Shanghai. Gu Xiao Rong, Institute of Law of Shanghai Academy of Social Studies, Shanghai. Hong Kong. Steven R. Sieker & L. Travis Benjamin, Baker & McKenzie, Hong Kong. Australia. Andrew White, Faculty of Law, University of Melbourne, Victoria. New Zealand. David Craig & Simon David, Bell Gully, Barristers and Solicitors, Wellington. Africa. South Africa. Pieter K. Smit, Financial Intelligence Center, Pretoria. Index.

Read more less

Book SynopsisInvestment Administration has a key role to play in the many and varied investment products and services that are available in the retail investment marketplace.Table of ContentsAbout the author. Introduction. PART I: INTRODUCTORY ELEMENTS. 1. WEALTH MANAGEMENT. 1.1 Introduction. 1.2 Wealth management market. 1.3 Types of business. 1.4 Investment services and products. 1.5 Investment firms. 1.6 Investment administration. PART II: INVESTMENT ADMINISTRATION. 2. NEW AND CLOSING BUSINESS. 2.1 Introduction. 2.2 New business. 2.3 Client types. 2.4 Know your customer. 2.5 Agreements. 2.6 Account opening. 2.7 Money laundering. 2.8 Validating the assets. 2.9 Transferring assets. 2.10 Raising assets. 2.11 Closing business and transfers. 2.12 Death of a client. 3. TRADING. 3.1 Introduction. 3.2 Stock market developments. 3.3 Equity trading. 3.4 Bond trading. 3.5 Regulation. 4. SETTLEMENT. 4.1 Introduction. 4.2 Fundamentals of settlement. 4.3 Settlement process. 4.4 UK settlement. 4.5 International settlement. 5. CORPORATE ACTIONS. 5.1 Introduction. 5.2 Corporate actions industry. 5.3 Types of event. 5.4 Private client corporate action processing. 5.5 Corporate events. 5.6 Income events. PART III: OTHER CONSIDERATIONS. 6. CUSTODY. 6.1 Introduction. 6.2 Protection of client assets. 6.3 Segregation of safe custody assets.. 6.4 Use of a custodian. 6.5 Nominee companies. 6.6 Global custodians. 6.7 Selecting a custodian. 6.8 Custody agreements and SLAs. 6.9 Reviewing the suitability of custodians. 7. TAX. 7.1 Introduction. 7.2 Income tax. 7.3 Tax treatment of dividends. 7.4 Capital gains tax. 7.5 Residence and domicile. 7.6 Withholding tax. 7.7 EU savings directive. 8. POWERS OF ATTORNEY. 8.1 Introduction. 8.2 Background. 8.3 Parties and terminology. 8.4 Enduring power of attorney. 8.5 Receiverships. 8.6 Mental capacity act 2005. 8.7 Administration. 9. OUTSOURCING. 9.1 Introduction. 9.2 Development of outsourcing. 9.3 Risks associated with outsourcing. 9.4 Regulatory principles. PART IV: INVESTMENT ACCOUNTS AND PRODUCTS. 10. INDIVIDUAL SAVINGS ACCOUNTS (ISAS). 10.1 Introduction. 10.2 Development of ISAs and PEPs. 10.3 Organisation and regulation. 10.4 Individual savings accounts. 10.5 Allowable investments. 10.6 New and closing business. 10.7 Voids and repairs. 10.8 Residence. 10.9 Investor reporting. 10.10 Reform of the ISA regime. 11. COLLECTIVE INVESTMENT SCHEMES. 11.1 Introduction. 11.2 Regulation of UK funds. 11.3 Types of UK funds. 11.4 Fund administration . 11.5 Pricing. 11.6 Dealing and settlement. 11.7 Share register. 11.8 Dividend and interest distributions. 11.9 Investor reporting. 12. TRUSTS. 12.1 Introduction. 12.2 Development of trusts. 12.3 Fundamentals of trusts. 12.4 Investment administration. 13. CHARITIES. 13.1 Introduction. 13.2 What is a charity? 13.3 Legal background to investment by charities. 13.4 Trustee investment powers and duties. 13.5 Investment policy. 13.6 Appointing an investment manager. 13.7 Common investment funds. 13.8 Use of nominees and custodians. 14. SELF-INVESTED PERSONAL PENSIONS. 14.1 Introduction. 14.2 Development of SIPPs. 14.3 What is a SIPP? 14.4 Setting up a SIPP. 14.5 Eligibility and contributions. 14.6 Permitted investments. 14.7 Benefits. 15. DERIVATIVE PRODUCTS. 15.1 Introduction. 15.2 Types of derivatives. 15.3 Uses of derivates. 15.4 Derivatives markets. 15.5 Structured products. 15.6 Covered warrants. 15.7 Exchange traded commodities. 15.8 Contracts for difference. Glossary. Bibliography. Reading Material. Index.

Read more less

Book SynopsisThis one-of-a-kind resource gives you all the practical and insightful information you need to find your ideal home and get it at a great price. You'll avoid common mistakes with step-by-step guidance on the buying process, as well as useful tools like checklists and guidelines and vital information on everything from financing to negotiations.Table of ContentsAcknowledgments. Introduction. CHAPTER 1. When Is It Time to Consider Owning Your Own Home? CHAPTER 2. Working with Professionals. CHAPTER 3. Planning Your Home Buying Adventure. CHAPTER 4. Mortgage Alternatives. CHAPTER 5. Types of Homes—Which Fits Your Needs Best? CHAPTER 6. Location, Location, Location. CHAPTER 7. Buying a Newly Constructed Home. CHAPTER 8. Buying an Existing Home. CHAPTER 9. Making Your Choice. CHAPTER 10. Making Your Offer. CHAPTER 11. Home Inspections, Appraisals, Title Policies, and Homeowner’s Insurance. CHAPTER 12. Homeowners Associations and Management Companies. CHAPTER 13. The Final Walk-Through and Closing. CHAPTER 14. Planning a Stress-Free Move. Conclusion. Home Buyer’s Glossary. Index.

Read more less

Book SynopsisThis one--of--a--kind resource gives you all the practical and insightful information you need to get top dollar when you sell your home. You'll avoid common mistakes with step--by--step guidance on the selling process, as well as useful tools like checklists and guidelines and vital information on everything from financing to negotiations.Table of ContentsAcknowledgments. Introduction. Chapter 1. It's Time to Sell. Chapter 2. Hiring an Agent to Help You Sell Your Home. Chapter 3. Preparing and Pricing Your Home to Sell. Chapter 4. Staging Your Home for Profit. Chapter 5. Market Realities. Chapter 6. Security and Other Issues with Marketing Your Home. Chapter 7. On the Market. Chapter 8. Working the Buyer's Offer. Chapter 9. You've Got a Deal! Preparing for Closing. Chapter 10. The Closing. Chapter 11. Planning a Stress-Free Move. Conclusion. Home Seller's Glossary. Index.

Read more less

Book SynopsisThrough his own trading experiences and those of individuals he has mentored, Dr. Brett Steenbarger is familiar with the challenges that traders face and the performance and psychological strategies that can meet those challenges. In Enhancing Trader Performance, Steenbarger shows you how to transform talent into trading skill through a structured process of expertise development and reveals how this approach can help you achieve market mastery.Table of ContentsIntroduction xi Acknowledgments xvii Author’s Note xix Chapter 1 Where Expertise Begins 1 Chapter 2 Finding Your Performance Niche as a Trader 20 Chapter 3 Building Competence 49 Chapter 4 Strategies for Cultivating Competence 78 Chapter 5 From Competence to Expertise 108 Chapter 6 Mechanics, Tactics, Strategies 135 Chapter 7 Performance Dynamics 164 Chapter 8 Cognitive Techniques for Enhancing Performance 192 Chapter 9 Behavioral Techniques for Enhancing Performance 213 Afterword The Making and Remaking of an Expert Trader 235 Conclusion 249 Appendix Resources for Performance 257 Bibliography 265 About the Author 273 Index 275

Read more less

Book SynopsisYou no longer need a traditional employer plan to get good, affordable health insurance. The New Health Insurance Solution can help you cut your health insurance costs in half if: You''re self-employed, an independent contractor, or your employer doesn''t provide health insurance (you can probably get coverage on your own for about $94/montha fraction of what an employer would have to pay for the same coverage) You are employed and pay extra to cover your spouse or children under your employer-sponsored planyou may save 50% by taking them off your employer plan You own a small business and are getting killed by double-digit premium increasesyou can now give employees tax-free money to buy their own plans and get your company out of the health insurance business The book also explains in detail the best solutions for you if: You can''t find affordable health insurance because you or a child have an expensive preexisting medical probTable of ContentsExecutive Summary: New Health Insurance Solutions for Individuals, Families, Self-Employed, and Businesses. Preface. Acknowledgments. PART I: How to Better Protect Your Family While Saving $5,000+ Each Year: Savvy and Affordable New Health Insurance Strategies. Chapter 1. You Are One Serious Illness Away from Bankruptcy: The Huge Gaps in Your Employer's Health Insurance Plan. Chapter 2. Why Buying Your Own Health Insurance Is Better, Cheaper, and Safer Than Your Company Plan. Chapter 3. Your Legal Rights to Health Insurance When You Lose Your Job or Change Jobs: ERISA, COBRA, and HIPAA. Chapter 4. How to Buy Your Own Log-Cost, High-Quality Health Insurance Policy. Chapter 5. The Best Options for Employees with a Good Company Plan: High Deductibles, Disability, Cafeteria Plans, FSAs, and HRAs. Chapter 6. Health Savings Accounts: Why You Should Fully Fund Your HSA before Putting Even $1 in Your IRA or 401 (k) ...and How to Build a $500,000+ HSA Nest Egg. Chapter 7. What to Do if You or a Family Member Has a Major Health Problem. Chapter 8. How to Get Affordable Medical Care When You Are Over 55: Early Retirement, Medicare, and Long-Term Care. Chapter 9. How to Save 10 to 75 Percent on Your Prescription Drugs. Chapter 10. How to Be a Smart Healthcare Shopper, Stay Healthy, and Keep the Savings. PART II: How Businesses Can Fix their Health Insurance Nightmare an Still Hire great Employees. Chapter 11. How Employers Can Save 50 Percent by Giving Employees Tax-Free Dollars to Buy Their Own Health Insurance: Defined Contribution Health Benefits. Chapter 12. HSA Plans for Employers: Why Every Employer Should Encourage Tax-Free Employee Contributions to HSAs. Chapter 13. HRAs for Employers: How to Use HRAs to Save $2,000 to $6,000 per Employee Each Year While Getting Your Employees Better Health Insurance. Epilogue: The Future of Affordable Health Insurance in America-Who Wins and Who Loses? Appendix A. State-by-State Guide to Individual/Family Health Insurance Costs. Appendix B. How Americans Get Health Insurance Today...and What about the 45 Million Uninsured? Notes. Index. About the Author.

Read more less

Book SynopsisThis book examines the main accounting and disclosure rules for financial institutions and financial instruments. It focuses on the essential roles of fair value accounting for financial instruments and risk disclosures in the financial analysis of financial instruments.Table of ContentsPreface ix Acknowledgments xvii Chapter 1 Financial Instruments and Institutions 1 Main Ingredients of the Analysis of Financial Instruments 4 Activities and Risks of Financial Institutions 11 Valuation of Financial Institutions in Practice 16 Chapter 2 Nature and Regulation of Depository Institutions 19 Activities of Depository Institutions 19 Bank Regulation 22 Bank Subtypes 35 Recent Trends 38 Chapter 3 Thrifts 45 Financial Statement Structure 46 Main Risk-Return Trade-Offs and Financial Analysis Issues 56 Chapter 4 Interest Rate Risk and Net Interest Earnings 63 Views of Interest Rate Risk 64 Interest Rate Risk Concepts 66 Analysis of Net Interest Earnings 78 Rate-Volume Analysis 81 Repricing Gap Disclosures 84 Chapter 5 Credit Risk and Losses 93 Economics of Credit Risk 95 Accounts for Loans and Loan Losses 97 Accounting and Disclosure Rules for Unimpaired Loans 100 Accounting and Disclosure Rules for Impaired Loans 107 Loan Portfolio Quality and Loan Loss Reserve Adequacy 110 Research on Banks’ Loan Loss Reserves 118 Appendix 5A: SunTrust Banks—After the Restatement 119 Chapter 6 Fair Value Accounting for Financial Instruments: Concepts, Disclosures, and Investment Securities 131 Fair Value Accounting for Financial Instruments 133 Disclosures of the Fair Value of Financial Instruments 141 Investment Securities 149 Appendix 6A: Washington Federal’s Big Gap 158 Chapter 7 Mortgage Banks 161 Mortgage Banking Industry, Major Players, and Activities 162 Financial Statement Structure 167 Main Risk-Return Trade-Offs and Financial Analysis Issues 174 Accounting for Fees and Costs 186 Chapter 8 Securitizations 189 Why and What? 192 Securitization Structures 196 SFAS No. 140 204 Financial Analysis Issues 216 Empirical Research on Securitizations 221 Servicing Rights and Prepayment-Sensitive Securities 222 Appendix 8A: Doral Financial’s Interesting Interest-Only Strips 224 Chapter 9 Elements of Structured Finance Transactions 235 Special-Purpose/Variable-Interest Entities 236 Related Transactions 244 Hybrid Financial Instruments 248 Financial Guarantees 251 Recent SEC Decisions Regarding Structured Finance Transactions 253 Chapter 10 Commercial Banks 255 Balance Sheet 257 Income Statement 261 Cash Flow Statement 265 Chapter 11 Derivatives and Hedging 269 Derivatives 272 Hedging 282 SFAS No. 133 (1998), as Amended 285 Framework for Assessing Financial Institutions’ Derivatives and Hedging 308 Chapter 12 Market Risk Disclosures 311 Overview of FRR No. 48 (1997) 312 Tabular Format 315 Sensitivity Approach 322 Value-at-Risk Approach 326 Comparison of Disclosure Approaches 331 Effect of SunTrust’s Derivatives and Hedging on Its Market Risk 332 Research 337 Appendix 12A: Bank of America’s Derivatives, Hedging, and Market Risk 337 Chapter 13 Lessors and Lease Accounting 347 Competitive Advantages of Leasing 350 Lease Structures and Contractual Terms 352 Lessors’ Risks 355 Lease Accounting Methods 357 Analysis Issues Regarding Lease Accounting Methods 366 Special Lease Transactions 369 Lessors’ Financial Statements 374 Lease Disclosures 379 Possible Future Changes in Lease Accounting 387 Chapter 14 Insurers and Insurance Accounting 389 Products 391 Risk-Return Trade-Offs 396 Regulation 403 Primary Insurance Accounting Standards 405 Accounting Standards Governing Embedded Derivatives and Other Life Insurance Policy Features 421 Financial Statements 423 Line of Business Disclosures 428 Other Insurance Accounting Systems 429 Chapter 15 Property-Casualty Insurers’ Loss Reserve Disclosures 435 Loss Reserve Footnote 438 Loss Reserve Development Disclosures 440 Calculating Loss Reserves by Accident Year 444 Calculating Loss Reserve Revisions by Accident Year 446 Calculating Claim Payments by Accident Year and Tail 448 Constructing Accident Year Loss Reserve T Accounts 452 Property-Casualty Expense Ratios 453 Chapter 16 Reinsurance Accounting and Disclosure 457 Accounting and Analysis Issues 459 Reinsurance Contracts 462 Accounting for Reinsurance Contracts 472 Reinsurance Disclosures and Analysis 487 Evolution of Financial Reporting for Reinsurance 493 Index 497

Read more less

Book SynopsisAccounting may be challenging, but with training and practice students can come out of a financial accounting course having achieved success! With David Weiner's Financial Accounting as a Second Language, students will get the practice and training they need to better understand fundamental principles, build confidence, and solve problems.Table of ContentsPreface ix Chapter 1 Basic Financial Accounting Concepts 1 Learning Objectives 1 Accounting as the Language of Business 2 Objectives of Financial Reporting 4 Basic Accounting Concepts 5 The Basic Financial Statements 8 Using Financial Statement Information 17 Review Questions 18 Practice Multiple Choice Questions 21 Chapter 2 The Accounting Cycle 24 Learning Objectives 24 Transaction Analysis 26 The Accounting Cycle 29 Summary of the Seven Types of Accounts 30 The Rules for Debits and Credits 30 The Chart of Accounts 32 Cash Basis versus Accrual Basis 33 The Journal Entry 33 Recording Journal Entries 38 Posting to the Ledger 40 The Trial Balance 41 Adjusting Entries 41 The Closing Process 45 Balancing the Permanent Accounts 47 Correcting Errors 47 Preparing the Financial Statements 48 Comprehensive Illustration 49 Review Questions 59 Practice Multiple Choice Questions 61 Chapter 3 Internal Controls, Cash, and Receivables 64 Learning Objectives 64 The Sarbanes–Oxley Act Requirements 65 Sarbanes–Oxley and Internal Control 66 Reporting Cash 68 The Bank Reconciliation 70 Accounts Receivable 73 Notes Receivable 77 Getting Cash for Receivables 78 Summary of Journal Entries 79 Review Questions 80 Practice Multiple Choice Questions 83 Chapter 4 Inventory 85 Learning Objectives 85 Basic Inventory Issues 86 Purchasing and Selling Inventory 89 The Cost of Goods Sold Model 91 The Periodic Method versus the Perpetual Method 92 Taking Inventory and the Cost Flow Assumptions 95 Lower of Cost or Market (LCM) 102 Impact of Inventory Errors 104 Review Questions 107 Practice Multiple Choice Questions 109 Chapter 5 Noncurrent Assets and Depreciation 113 Learning Objectives 113 Noncurrent Assets 114 Long-Term Investments 114 Property, Plant, and Equipment 116 Declining-Balance Method 121 Depreciation Conventions 123 Intangible Assets 126 Impairment 129 Accounting for Research and Development 131 Summary of Journal Entries 132 Review Questions 133 Practice Multiple Choice Questions 135 Chapter 6 Current and Noncurrent Liablities 139 Learning Objectives 139 Liabilities 140 Current Liabilities 140 Long-Term Liabilities 147 Summary of Journal Entries 154 Review Questions 155 Practice Multiple Choice Questions 158 Chapter 7 Stockholders’ Equity 160 Learning Objectives 160 Stockholders’ Equity 162 Summary of Journal Entries 173 Review Questions 174 Practice Multiple Choice Questions 176 Chapter 8 the Statement of Cash Flows 178 Learning Objectives 178 Objectives of the Statement of Cash Flows 179 Format of the Statement of Cash Flows 180 A Step-by-Step Approach to Solving Statement of Cash Flows Problems 182 Review Questions 202 Practice Multiple Choice Questions 203 Chapter 9 Review of Financial Statements and Financial Statement Analysis 205 Learning Objectives 205 Horizontal and Vertical Analysis 206 DuPont Method 207 Financial Ratio Analysis 208 Review Questions 217 Practice Multiple Choice Questions 218 Appendix A Basic College Skills 221 Learning Objectives 221 College Skills 222 Appendix B the Time Value of Money 239 Learning Objectives 239 Introduction 239 Basic Concepts 239 Making Present Value and Future Value Calculations: A Summary 245 Practice Multiple Choice Questions 260 Appendix C Gross Profit Inventory Computation 262 The Gross Profit Method 262 Appendix D Advanced Topics for Chapter Five: Capitalization Of Interest and Nonmonetary Exchanges 266 Capitalization of Interest on Self-Constructed Assets 266 Nonmonetary Exchanges 268 Appendix E The Cpa and the Auditor’s Report 272 Introduction 272 Generally Accepted Auditing Standards 273 Glossary 277 Index 299

Read more less

Book SynopsisCreated by the experienced author team of Frank Fabozzi, Henry Davis, and Moorad Choudhry, Introduction to Structured Finance examines the essential elements of this discipline.Trade ReviewStructured finance is one of those elusive terms that mean different things to different people. With this wonderful book, authors Fabozzi, Davis and Choudhry first explore the boundaries of what is and is not considered to be structured finance. A simple definition would be that structured finance is any form of non-traditional financing, but this begs the question of where to draw the line between traditional and non-traditional. Certainly, most people wouldn't consider a vanilla swap to be structured finance! Structured finance might be described in terms of techniques that are commonly employed—securitization, derivatives, special purpose vehicles (SPVs), leasing, project finance, etc. The authors explore this and other approaches to, if not defining structured finance, at least clarifying its boundaries.-- Riskbook.comTable of ContentsPreface vii About the Authors xiii CHAPTER 1 Introduction 1 Definition of Structured Finance 1 Other Definitions of Structured Finance 2 Case Study: How Enron Has Affected the Boundaries of Structured Finance 15 Conclusions 22 CHAPTER 2 Interest Rate Derivatives 23 Interest Rate Forward and Futures Contracts 23 Futures Contracts 24 Interest Rate Swaps 26 Options 36 Caps and Floors 43 CHAPTER 3 Credit Derivatives 45 Documentation and Credit Derivative Terms 45 Credit Default Swaps 48 Credit Default Swap Index 50 Basket Default Swaps 51 Asset Swaps 54 Total Return Swaps 57 Economics of a Total Return Swap 58 CHAPTER 4 Basic Principles of Securitization 65 What Is a Securitized Transaction? 66 Illustration of a Securitization 67 Reasons Why Entities Securitize Assets 70 Benefits of Securitization to Investors 79 What Rating Agencies Look at in Rating Asset-Backed Securities 79 Description of the Collateral 82 Prepayments Measures 87 Defaults and Delinquencies 90 CHAPTER 5 Securitization Structures 95 Use of Interest Rate Derivatives in Securitization Transactions 95 Credit Enhancement 104 More Detailed Illustration of a Securitization 113 CHAPTER 6 Cash Flow Collateralized Debt Obligations 119 Family of CDOs 120 Basic Structure of a Cash Flow CDO 122 CDOs and Sponsor Motivation 124 Compliance Tests 127 CHAPTER 7 Synthetic Collateralized Debt Obligation Structures 133 Motivations for Synthetic CDOs 134 Mechanics 136 Funding Mechanics 138 Investor Risks in Synthetic Transactions 140 Variations in Synthetic CDOs 141 The Single-Tranche Synthetic CDO 147 Summary of the Advantages of Synthetic Structures 149 Factors to Consider in CDO Analysis 150 Case Study 151 CHAPTER 8 Securitized and Synthetic Funding Structures 155 Commerical Paper 155 Asset-Backed Commercial Paper 157 Synthetic Funding Structures 162 CHAPTER 9 Credit-Linked Notes 181 Description of CLNs 181 Illustration of a CLN 182 Investor Motivation 182 Settlement 182 Forms of Credit Linking 184 The First-to-Default Credit-Linked Note 190 CHAPTER 10 Structured Notes 193 Structured Notes Defined 194 Motivation for Investors and Issuers 196 Issuance Form and Issuers 197 Creating Structured Notes 198 Examples of Structured Notes 199 CHAPTER 11 Large Ticket Leasing: Leasing Fundamentals 207 How Leasing Works 207 Types of Equipment Leases 208 Full Payout Leases versus Operating Leases 211 Reasons for Leasing 211 Types of Lessors 216 Lease Brokers and Financial Advisers 217 Lease Programs 217 Financial Reporting of Lease Transactions by Lessees 218 Federal Income Tax Requirements for True Lease Transactions 222 Synthetic Leases 224 Valuing a Lease: The Lease or Borrow-to-Buy Decision 225 CHAPTER 12 Leveraged Lease Fundamentals 237 Parties to a Leveraged Lease 239 Structure of a Leveraged Lease 243 Closing the Transaction 245 Cash Flows During the Lease 246 Debt For Leveraged Leases 247 Facility Leases 249 Construction Financing 252 Credit Exposure of Equity Participants 253 Tax Indemnification for Future Changes in Tax Law 253 Need for a Financial Adviser 254 The Steps in Structuring, Negotiating, and Closing a Leveraged Lease 256 CHAPTER 13 Project Financing 259 What Is Project Financing? 260 Reasons for Jointly Owned or Sponsored Projects 262 Credit Exposures in a Project Financing 262 Key Elements of a Successful Project Financing 264 Causes for Project Failures 265 Credit Impact Objective 277 Accounting Considerations 279 Meeting Internal Return Objectives 282 Other Benefits of a Project Financing 282 Tax Considerations 283 Disincentives to Project Financing 283 Recent Trends 284 APPENDIX A The Basel II Framework and Securitization 287 Basel Rules 288 Impact on Securitization and Credit Derivatives 293 APPENDIX B Synthetic Securitization: Case of Mortgage-Backed Securities 297 Transaction Description 297 Deal Structures 298 Investor Considerations 301 APPENDIX C Home Run! A Case Study of Financing the New Stadium for the St. Louis CardinalsCynthia A. Baker and J. Paul Forrester 303 APPENDIX D Municipal Future-Flow Bonds in Mexico: Lessons for Emerging EconomiesJames Leigland 309 APPENDIX E Crown Castle Towers LLC, Senior Secured Tower Revenue Notes, Series 2005-1Taimur Jamil 321 APPENDIX F MVL FIlm Finance LLCOlga Filipenko 335 APPENDIX G Presale: Honda Auto Receivables 2006-1 Owner TrustAmanda M. Soriano and Nadine E. Gunter 339 APPENDIX H Presale: ACG Trust IIIAnthony Nocera, Ted Burbage, Philip Baggaley, and Michael K. Vernier 345 APPENDIX I CNH Equipment Trust 2006-ADu Trieu, Bradley Sohl, Joseph S. Tuczak, and Peter Manofsky 355 APPENDIX J CIT Equipment Collateral 2006-VT1Brigid E. Fitzgerald, John Bella, and Peter Manofsky 365 Index 373

Read more less

Book SynopsisSeamlessly bridging academic accounting with real-life applications, Crash Course in Accounting and Financial Statement Analysis, Second Edition is the perfect guide to a complete understanding of accounting and financial statement analysis for those with no prior accounting background and those who seek a refresher.Trade Review"I commend this book to you. It is filled with good examples, interesting information, and timely and informative mini-problems that help to coach you through the arcane subject of accounting, in an easy-to-understand way." (Graziadio Business Report, May 2007)Table of ContentsAbout the Authors viii Preface x Chapter 1 Introduction to Accounting 1 What Is Accounting? 1 Why Is Accounting Important? 2 Making Corporate Decisions 2 Making Investment Decisions 2 Accounting Facilitates Corporate and Investment Decisions 2 Who Uses Accounting? 2 U.S. Accounting Regulations 2 Generally Accepted Accounting Principles 2 Overview of the Securities and Exchange Commission 3 Overview of the Financial Accounting Standards Board 4 International Accounting Regulations 4 Convergence of U.S. GAAP and IFRS 6 Summary 6 Chapter 2 Basic Accounting Principles 11 Assumptions 11 Assumption 1: Accounting Entity 12 Assumption 2: Going Concern 13 Assumption 3: Measurement and Units of Measure 13 Assumption 4: Periodicity 14 Wrap-up: Assumptions 15 Principles 18 Principle 1: Historical Cost 18 Principles 2 and 3: Accrual Basis 18 Principle 4: Full Disclosure 21 Wrap-up: Principles 21 Constraints 24 Constraint 1: Estimates and Judgments 24 Constraint 2: Materiality 24 Constraint 3: Consistency 24 Constraint 4: Conservatism 24 Summary 27 Chapter 3 Financial Reporting 29 Financial Reporting Overview 29 Finding Financial Reports 30 Form 10-K (Annual Filing) 30 Why Is the 10-K Important? 30 Form 10-Q (Quarterly Filing) 30 Other Important Filings 31 Form 8-K 31 Form S-1 31 Form 14A 31 Form 20-F 31 Summary 32 Chapter 4 Reading the Annual Report 35 Introduction 35 Letter to Stockholders 36 Financial Highlights 38 Management’s Discussion and Analysis 38 Financial Statements 40 Income Statement 40 Balance Sheet 41 Cash Flow Statement 41 Notes to Consolidated Statements 41 Report of Management’s Responsibilities 43 Certification of Financial Statements 46 Risk Factors 48 Legal Proceedings 48 Report of Independent Auditors 49 Directors and Officers 52 Summary 54 Chapter 5 Income Statement 55 What is the Income Statement? 55 Why Is It Important? 57 Revenues 57 Not All Income Is Revenue 58 Bad Debt Expense 61 What Is Bad Debt Expense? 61 Revenue Recognition: To Recognize and When? 61 Revenue Recognition: Long-Term Projects 62 Expense Recognition and Accrual Basis of Accounting 65 Basic Principles Revisited: Accrual Basis of Accounting and Matching Principle 65 Putting It All Together: The Accrual Basis of Accounting 65 Why Use Accrual Accounting? 65 Accrual versus Cash Accounting: What’s the Difference? 66 Revenue Manipulation 67 Cost of Goods Sold 70 COGS Do Not Include Administrative Costs 70 Gross Profit 73 Selling, General and Administrative 75 Research and Development 77 Stock Options Expense 77 Depreciation Expense 80 Depreciation Is a “Phantom” Noncash Expense 82 Straight-Line Depreciation Method 83 Accelerated Depreciation Methods 86 Depreciation Methods Compared 92 Amortization 92 Amortization Is a “Noncash” Expense (Like Depreciation) 93 What Is the Difference between Depreciation and Amortization? 93 Summary 96 Goodwill 96 Goodwill Not Amortized after 2001 96 Interest Expense 97 Interest Income 99 Other Nonoperating Income 99 Income Tax Expense 99 Equity Income in Affiliates 100 Minority Interest 102 Net Income 104 Shares Outstanding 104 Representation of Shares Outstanding in the Income Statement 104 Common Dividends 108 Preferred Dividends 108 Earnings per Share 108 Nonrecurring Items 110 Unusual or Infrequent Items 110 Discontinued Operations 112 Extraordinary Items 113 Accounting Changes 114 Earnings before Interest, Taxes, Depreciation, and Amortization 117 EBITDA: Popular Measure of a Company’s Financial Performance 118 EBITDA Has Several Shortcomings 119 EBIT 122 Summary 123 Chapter 6 Balance Sheet 129 Introduction 129 Assets Represent the Company’s Resources 131 Liabilities and Shareholders’ Equity Represent the Company’s Sources of Funds (i.e., How It Pays for Assets) 134 Lemonade Stand and the Accounting Equation 137 Balance Sheet 137 Double-Entry Accounting 138 Why Is Double-Entry Accounting Important? 143 Income Statement Revisited: Links to Balance Sheet 143 Retained Earnings: The Link Between Balance Sheet and Income Statement 144 Impact of Revenues on the Balance Sheet 145 Impact of COGS on the Balance Sheet 145 Impact of SG&A on the Balance Sheet 146 Impact of Depreciation on the Balance Sheet 146 Impact of Interest Expense on the Balance Sheet 146 Impact of Tax Expense on the Balance Sheet 146 Total Impact of the Year on the Balance Sheet 147 Summary 148 Order of Liquidity 149 Current versus Noncurrent Assets 149 Current versus Long-Term Liabilities 149 Assets 153 Inventories 157 LIFO Reserve: The Link between FIFO and LIFO Inventory Methods 164 Writing Down Inventories 164 Deferred Taxes 164 PP&E, Net of Depreciation 169 Reconciliation of PP&E 170 Fixed Asset Impairments 175 Fixed Asset Retirement and Disposal 176 Intercompany Investments 177 Consolidation 179 Intangible Assets 179 Goodwill 181 Summary: Intangible Assets and Goodwill 184 Summary: Assets 186 Liabilities 190 Other Typical Current Liabilities 192 Debt 193 Short-Term Debt versus Long-Term Debt 193 Capital Leases 194 Operating Leases 194 Deferred Taxes 195 Summary: Deferred Taxes 197 Pensions 198 Defined Benefit Plan 202 Minority Interest 205 Summary: Liabilities 209 Shareholders’ Equity 212 Introduction 213 Common Stock 214 Additional Paid-In Capital 214 Preferred Stock 215 Treasury Stock 216 Retained Earnings 217 Summary: Shareholders’ Equity 219 Summary 222 Chapter 7 Cash Flow Statement 223 Introduction 223 Cash Flow Statement to the Rescue! 225 Cash Flow from Operations 228 Overview 228 Indirect Method 228 Getting from Net Income to Cost from Operations 229 Depreciation 231 Working Capital 233 Changes in Accounts Receivable 235 Changes in Accounts Receivable and the Lemonade Stand 235 Changes in Inventories 236 Changes in Inventories and the Lemonade Stand 237 Changes in Accounts Payable 239 Accounts Payable and the Lemonade Stand 239 Changes in Other Current Assets 240 Changes in Other Current Liabilities 241 Increases/Decreases in Deferred Taxes 241 Summary: Cash Flow from Operations 244 Cash Flow from Investing Activities 247 Overview 247 Components 247 Cash Flow from Financing Activities 251 Overview 251 Components 251 How the Cash Flow Is Linked to the Balance Sheet 255 Summary 256 Online Exercise 256 Chapter 8 Financial Ratio Analysis 259 Introduction 259 What Is Financial Ratio Analysis? 259 Liquidity Ratios 260 Current Ratio 260 Quick (Acid) Test 260 Current Cash Debt Coverage Ratio 261 Profitability Ratios 261 Gross Profit Margin 261 Profit Margin on Sales 261 Return on Assets 262 Return on Equity 262 Earnings per Share 262 Price-to-Earnings Ratio 262 Payout Ratio 262 Activity Ratios 262 Receivables Turnover 263 Days Sales Outstanding 263 Inventory Turnover 263 Days Sales of Inventory 263 Asset Turnover 263 Coverage Ratios 263 Debt to Total Assets 264 Times Interest Earned 264 Cash Debt Coverage Ratio 264 Calculations 265 Appendix 267 Stock Options 267 Stock Options Expensing 268 Then 268 . . . and Now 269 Debt 270 How Are These Two Forms of Capital Raised? 270 Who Issues Debt? 270 Long-Term Debt 271 Capital versus Operating Leases 272 Direct Method 272 Index 275

Read more less

Book SynopsisPraise for The Markets Never Sleep An excellent primer for futures and the global financial market, a clear voice of their importance for all traders. Tom also gives an easy-to-understand professional approach to discipline, money management, and the ''numbers'' to watch that indicate market direction. Help for all traders to earn bigger, more consistent profits. --Ned W. Bennett, CEO, optionsXpress, Inc. Well . . . they''ve done it again! Tom and Patsy have written another insightful and entertaining book on understanding and trading the world''s markets. The Markets Never Sleep shows how to analyze all the global markets and use timing and money management to control losses and reap significant rewards without using up all of one''s emotional energy. In other words, everything needed to make trading fun and profitable! --Russ Mothershed, former corporate executive and current DTI student Trading follows the sun, as Busby points out, Table of ContentsPreface. About the Authors. Acknowledgments. Chapter 1: Let’s Rock and Roll: Why I Like the Global Beat. Chapter 2: Stepping to the Tune: Understanding How the Markets Work. Chapter 3: Gettin’ in the Groove: How to Think Globally. Chapter 4: Land of the Rising Sun: The First Tunes Are Asian. Chapter 5: Land of the Long Siesta: Europe Joins the Party. Chapter 6: The United States Steals the Show. Chapter 7: Short-Term Strategies around the World. Chapter 8: Swing Trading Strategies across Time Zones. Chapter 9: Approaches to Long-Term Trading. Chapter 10: Golden Keys to Unlocking the Secrets of the Financial Markets. Chapter 11: Managing Risk in Global Markets. Chapter 12: Consistency, Consistency, Consistency. Chapter 13: Preparing for the Trading Day. Chapter 14: Mind Over Matter: Breaking through the Psychological Barriers. Chapter 15: You Still Have Time to Sleep. Chapter 16: So You Want to Be a Trader: Profile of a Winner. Chapter 17: Wrapping It Up. Index.

Read more less

Book SynopsisPraise for ADVENTURES of a CURRENCY TRADER A truly easy, unique, and enjoyable read! Rob has done it once again to teach us in the funniest way possible how not to make the most common trading mistakes. If you are tired of reading how-to books, this is perfect for you. I highly recommend this book to all traders. Everyone will learn something about themselves by reading this book. Kathy Lien, author, Day Trading the Currency Market, and Chief Strategist, www.dailyfx.com Adventures of a Currency Trader is a must read for anyone who has ever traded or is thinking about trading in the Forex markets. Rob Booker has a unique way of taking years of market knowledge and transforming it into an educational and entertaining experience. It has quickly become a cult classic in my trading library! H. Jack Bouroudjian, Principal, Brewer Investment Group Brilliant! Rob''s humor and humanity shine through in this parable about trading and life. FilleTrade Review"…you will find this book riveting and occasionally amusing, but nothing less than eye-opening." (Securities & Investment review , June 2007)Table of ContentsForeword ix Preface xi Acknowledgments xiii About the Author xv Introduction 1 Chapter 1 In Search of Amazing Profits 3 Chapter 2 The Future Looks Bright 11 Chapter 3 A Trip to the Thirty-First Floor 16 Chapter 4 Two Promising Conversations 28 Chapter 5 Lessons Learned 33 Chapter 6 A Turn for the Worse 45 Chapter 7 Trying to Awake from the Nightmare 57 Chapter 8 Charlie Flank Goes to U.S. National Bank 63 Chapter 9 Mapping Out a New Career 73 Chapter 10 Charlie Flank Meets His Match 79 Chapter 11 Coming Clean 94 Chapter 12 Looks Can Be Deceiving 104 Chapter 13 The Story of George Sisler 114 Chapter 14 Back to Square One 122 Chapter 15 Breakfast with Harvey 133 Chapter 16 Back to Where It All Began 149 Chapter 17 Testing 164 Chapter 18 Homework 175 Chapter 19 Team Banes Begins Anew 183 Chapter 20 Presenting Our Findings 189 Chapter 21 Back in the Game 194 Chapter 22 Return to the Thirty-First Floor 197 Chapter 23 Settling My Tab 200 Epilogue 203 Appendix A: The Retail Carry Trade 207 Appendix B: How I Got Six Hundred Pips 211 Index 215

Read more less

Book SynopsisTraditionally, real estate agents help home sellers get the best deal on their home, but no one covers the buyer's side. This guide shows you how to make the switch from representing sellers to representing buyers, so you can keep making money even as the seller's market slows down. Learn to earn big commissions, no matter what happens to the market.Table of ContentsPreface. Introduction. 1. The History of the Real Estate Industry. We have gone from open listings to exclusive listings with sellers. 2. The Changing Real Estate Market. Today we are going from open listings to exclusive listings with buyers. 3. Why Buyers Are Liars, Flakes, and Lookie-Loos. Buyers are lookie-loos because of you. 4. Why List Buyers? Your time is valuable and you are worth the money. 5. Why Buyers Will List with You. Buyers, like sellers, want to be represented in a real estate transaction. 6. Making the Listing Presentation to Buyers. Agency disclosure opens the door to listing buyers. 7. How to Be Paid Every Time You Work with Buyers. Make at least $100 per hour working with buyers. 8. How to Ask for and Receive Retainers from Buyers. You will never work with buyers for free again. 9. Representing Buyers. You are a professional. Act like one. 10. Dual Agency. Twice the risk, twice the reward. 11. Divided Agency. How much time do you want to spend in the gray bar motel? 12. Commission Does Not Determine Agency. Who pays your real estate commission does not determine whom you represent. 13. Being a Buyer’s Agent. Think, talk, and act like a buyer’s agent. 14. Buyer Loyalty. Your buyers are loyal to you because you trust them and they trust you. 15. Making Money Working with Buyers. You can make money working with buyers before, during, or after the closing. 16. Implementing a Professional Program to List Buyers. You can implement a professional program to list buyers quickly and easily. 17. The Future of the Real Estate Industry. Welcome to a completely professional real estate industry. Conclusion. Index.

Read more less

Book SynopsisStrategic Corporate Finance provides a 'real-world' application of the principles of modern corporate finance, with a practical, investment banking advisory perspective. A major new text on corporate finance, this book addresses all the critical issues in corporate finance both for practitioners, and students, entering this field.Table of ContentsPreface xi List of Figures xiii List of Tables xv Acknowledgments xvii About the Author xix PART ONE Managing the Left-Hand Side of the Balance Sheet CHAPTER 1 The Cost Of Capital 3 Calculation Pitfalls 3 Market Risk Premium (MRP) 5 Toward a Better Beta 10 The ‘‘Riskless Rate’’ 13 The Cost of Debt 14 Global Capital Costs 16 WACC and Hurdle Rates 23 CHAPTER 2 Fix: Finding Your Sources of Value 26 Why Shareowner Value? 27 Performance Measurement Pitfalls 28 Measuring Economic Profit and Value 30 Analyzing the Corporate Portfolio 35 Incorporating the Cost of Capacity 39 Value-Based Strategies and Tactics 43 Managing for Value 45 Balancing Performance with Value 52 CHAPTER 3 Sell: Creating Value Through Divestiture 54 Divestiture Creates Value 56 Sources of Value: Motives for Divestiture 58 Alternative Methods of Disposition 60 What Works Best for Whom? 63 What Happens Longer Term? 64 Practical Impediments to Divestiture 65 Financial Policy Considerations 70 Tax Considerations and Structural Refinements 70 CHAPTER 4 Grow: How To Make M&A Pay 73 M&A Today 73 Transactions that Create Value 77 M&A Fact and Fallacy 81 RX for the ‘‘Conglomerate Discount’’ 86 EVA and M&A 88 How ‘‘Serial Acquirers’’ Create Value 90 Financial Policy Considerations 93 Financing Growth 94 CHAPTER 5 Cash and The Optimal Capital Structure 97 Trends and Implications 98 How Much Is Too Much? 100 The Costs and Benefits of Excess Cash 105 How the Market Views Excess Cash 108 Optimal Capital Allocation 109 PART TWO Managing the Right-Hand Side of the Balance Sheet CHAPTER 6 An Executive’s Guide to Credit Ratings 117 Trends and Implications 117 Empirical Evidence 123 Limitations of Quantitative Credit Analysis 123 What Metrics Matter Most? 126 Case Study: Treatment of Pension and Postretirement Liabilities 131 Multivariate Credit Models 133 Industry Considerations 135 Case Study: Property and Casualty Insurance 135 Application Issues 137 How to Manage Your Agencies 137 Case Study: Illustration of Secured and Unsecured Notching 139 CHAPTER 7 Today’s Optimal Capital Structure 141 Value-Based Financial Policy 141 Less Debt Is Now ‘‘Optimal’’ 143 Extend Duration When Rates Are Low 146 Maintain Financial Liquidity to ‘‘Insure’’ Your Equity 149 A New Perspective on Equity 151 Case Study: Does Tech Need Debt? 154 CHAPTER 8 Dividends and Buybacks: Calibrating Your Shareholder Distributions 160 The Cash Problem 162 Dividends Are Back 163 How Dividends and Buybacks Create Value 165 Should You Increase Your Dividend? 171 How Large Should Your Buyback Program Be? 178 How to Execute Your Share Repurchase Program 181 CHAPTER 9 The Stock Liquidity Handbook 187 Measuring Stock Liquidity 188 The ‘‘Liquidity Discount’’ 191 Implications of Stock Illiquidity 192 Solutions to Illiquidity 193 Stock Splits 195 PART THREE Managing the Enterprise CHAPTER 10 Strategic Risk Management: Where ERM Meets Optimal Capital Structure 203 The Value of Risk Management 204 Mapping and Modeling Risk 209 Managing to a Benchmark 213 External Considerations and Constraints 216 ERM Case Study: Metallgesellschaft AG 219 Capital Structure Solutions 220 CHAPTER 11 Best Practices In Hedging 224 Which ‘‘Exposure’’ to Hedge 225 Hedge Horizon 230 Hedge Ratio 232 Options versus Forwards 233 Accounting Considerations 235 Implementation 236 CHAPTER 12 ERM Case Study: Reengineering The Corporate Pension 238 Why Now? 239 The Problems with Equity 240 The Case for More Bonds 243 Optimal Capital Structure Reprise 246 Capital Markets Solutions 248 The Boots Case 251 Why It Still Hasn’t Happened 252 APPENDIX A Resources 254 Tools and Portals 254 New Research and Literature Search 254 Economic Research and Data 254 News and Market Data 254 Corporate Governance and Compensation 255 Other Agencies 255 Endnotes 256 References 268 Index 277

Read more less

Book SynopsisA strategy to profit when markets are range boundwhich is half of the time One of the most significant challenges facing today's active investor is how to make money during the times when markets are going nowhere. Bookshelves are groaning under the weight of titles written on investment strategy in bull markets, but there is little guidance on how to invest in range bound markets. In this book, author and respected investment portfolio manager Vitaliy Katsenelson makes a convincing case for range-bound market conditions and offers readers a practical strategy for proactive investing that improves profits. This guide provides investors with the know-how to modify the traditional, fundamentally driven strategies that they have become so accustomed to using in bull markets, so that they can work in range bound markets. It offers new approaches to margin of safety and presents terrific insights into buy and sell disciplines, international investing, Quality, Valuation, and Growth framTrade ReviewKatsenelson's is straightforward enough to keep a rookie investor engaged, and in-depth enough to retain the interest of old pros, which makes this a great book for those of all skill levels. He does a comprehensive job of reviewing the market's past, projecting its potential future, and developing a case for why value investing will shine as the market stagnates. He combines historical and financial analysis, along with engaging stories from his experience as a professional investment manager.--Chuck Saletta, Motley Fool This book should be considered a practical compendium of modern finance, leaving no stones unturned on your way to better investments. Katsenelson’s passionate, witty and accessible writing expertly takes the reader through his original framework for valuing stocks in range-bound markets. A student of history and an overzealous stock picker, the author entertainingly illustrates every concept with a collection of real-world examples, demonstrating an impressive breadth and depth of understanding of what makes stocks move!--J.P. Tremblay, CFA "How to adapt value investing for "range-bound" markets." (Financial Times, Tues 26th February 2008) "The new Benjamin Graham is Vitaliy N. Katsenelson. I highly recommend Katsenelson's book, Active Value Investing: Making Money in Range-Bound Markets (Wiley, 2007). I like to think the old Ben Graham would have recommended it, too."--ForbesTable of ContentsPreface xiii Part One What the Future Holds Chapter 1 Introduction: Range-Bound Markets Happen 3 Fasten Your Seat Belts and Lower Your Expectations 3 Let’s Identify the Animal 4 Secular versus Cyclical 4 Distinction between Secular Bull, Bear, and Range-Bound Markets 6 Is 100 Years Long Enough? 7 Stocks Carried the Torch in the Long-Run Marathon 8 International Stocks Were Bright Lights, Too 10 Will Gold Shine Again? 11 Gold’s Recently Emerged Competition 13 The Deception of the Long Run (Marathon) 14 Range-Bound Markets Erode Bull Market Returns 15 The Long Run for Us May Be Shorter Than We Think 17 Chapter 2 Emotions of Secular Bull, Bear, and Range-Bound Markets 23 Bull Market Euphoria 23 Bear Market Doldrums 25 What Does a Secular Range-Bound Market Feel Like? 29 Volatility of Bull and Range-Bound Markets 31 Chapter 3 Stock Market Math 37 Sources of Capital Appreciation: Earnings Growth 38 Sources of Capital Appreciation: Price to Earnings 48 Sources of Dividend Yield 57 Why Range-Bound Markets Follow Bull Markets 61 It Is Not Over Until It Is Over 62 Chapter 4 Bonds: A Viable Alternative? 67 Why Not Bonds? 67 Asset Allocation Role Is Diminished in Range-Bound Markets 69 Part Two Active Value Investing Analytics Introduction to Analytics: The Quality, Valuation, and Growth Framework 77 Chapter 5 The ‘‘Q’’—Quality 79 Competitive Advantage 79 Management 82 Predictable Earnings 89 Strong Balance Sheet 91 Significance of Free Cash Flows 95 High Return on Capital 102 Conclusion 102 Chapter 6 The ‘‘G’’—Growth 103 Sources of Growth: Earnings Growth and Dividends 103 Past Has Passed 111 Future Engines of Growth 112 Dividends 114 Growth Matters—A Lot! 117 Chapter 7 The ‘‘V’’—Valuation 119 Tevye the Milkman’s Approach to Valuation 119 Review of Relative Valuation Tools 128 Absolute Valuation Tools—Discounted Cash Flow Analysis 132 Relative versus Absolute Tools 134 Absolute Models Overview 136 The False Precision of Math 137 Absolute P/E Model 139 Discount Rate Model 148 Margin of Safety Model 151 The Marriage of Absolute P/E and Margin of Safety 155 Bring Out the Toolbox 155 The P/E Compression and How to Deal with It 157 Chapter 8 Let’s Put It All Together 165 The Added Clarity 165 One Out of Three Is Not Enough 165 Two Out of Three Is Better, But Is It Enough? 167 Conclusion 174 Strategy Introduction to Strategy: The Value of Process and Discipline 177 Chapter 9 Buy Process—Fine-Tuning 179 The Value of the Process and Discipline 179 Think Long-Term, Act Short-Term 181 Meet Your New Best Friend—Volatility 182 Time Stocks, Not the Market 183 Cash Is King 185 Be Ready to Strike When the Time Comes 186 Chapter 10 Buy Process—Contrarian Investing 187 Contrarian Is the Name of the Game 187 You Don’t Have to Own It 189 Be a Myth Buster 190 Quantify Everything and Be a Contrarian Headline Investor 191 Time Arbitrage 192 Finding New Ideas 193 Do In-Depth Primary (Your Own) Research and Document It 200 Chapter 11 Buy Process—International Investing 201 The World Has Flattened: Hola, Bonjour, Guten Tag, Buon Giorno to the Rest of the World 201 Same Difference 202 Location of Corporate Headquarters Abroad May Not Constitute a Foreign Company 203 You Are Exposed to More Foreign Political Risk Than You Realize 204 What About the United States? 205 Pick Your Comfort Zone and Go from There 206 Don’t Confuse a Fast-Growing Economy and a Good Investment 207 Currency Risk 207 How Much Is Too Much? 208 Conclusion 209 Chapter 12 Sell Process—Make Darwin Proud 211 Selling When Stock Price Has Gone Up 212 Selling When Fundamentals Have Deteriorated 215 Conclusion 221 Risk and Diversification Introduction to Risk and Diversification 225 Chapter 13 A Different View of Risk 227 What Is Risk? 227 Properties of Randomness 228 The Crocodile Hunter, Randomness, and Investing 229 Understand the Linkage Between and Inside QVG Dimensions 234 Identify Impact of Randomness on Value Creators 235 The Cost of Being Wrong 238 Conclusion 239 Chapter 14 A Different View of Diversification 241 Don’t Bet the Farm! 242 Too Many Eggs or Too Many Baskets 243 Mental Accounting and Diversification 244 Mental Accounting and Randomness in a Stock Portfolio 246 Randomness Could Be Your Friend 248 Chapter 15 Conclusion and Implication 251 I Could Be Wrong, But I Doubt It 251 Bull Markets 252 Bear and Range-Bound Markets 253 Bonds? 255 No, I Am Not Wrong 256 Appendix—Years to Bull Market 257 Acknowledgments 267 Notes 273 Index 275

Read more less

Book SynopsisThis groundbreaking book extends traditional approaches of risk measurement and portfolio optimization by combining distributional models with risk or performance measures into one framework.Table of ContentsPreface xiii Acknowledgments xv About the Authors xvii Chapter 1 Concepts of Probability 1 1.1 Introduction 1 1.2 Basic Concepts 2 1.3 Discrete Probability Distributions 2 1.3.1 Bernoulli Distribution 3 1.3.2 Binomial Distribution 3 1.3.3 Poisson Distribution 4 1.4 Continuous Probability Distributions 5 1.4.1 Probability Distribution Function, Probability Density Function, and Cumulative Distribution Function 5 1.4.2 The Normal Distribution 8 1.4.3 Exponential Distribution 10 1.4.4 Student’s t-distribution 11 1.4.5 Extreme Value Distribution 12 1.4.6 Generalized Extreme Value Distribution 12 1.5 Statistical Moments and Quantiles 13 1.5.1 Location 13 1.5.2 Dispersion 13 1.5.3 Asymmetry 13 1.5.4 Concentration in Tails 14 1.5.5 Statistical Moments 14 1.5.6 Quantiles 16 1.5.7 Sample Moments 16 1.6 Joint Probability Distributions 17 1.6.1 Conditional Probability 18 1.6.2 Definition of Joint Probability Distributions 19 1.6.3 Marginal Distributions 19 1.6.4 Dependence of Random Variables 20 1.6.5 Covariance and Correlation 20 1.6.6 Multivariate Normal Distribution 21 1.6.7 Elliptical Distributions 23 1.6.8 Copula Functions 25 1.7 Probabilistic Inequalities 30 1.7.1 Chebyshev’s Inequality 30 1.7.2 Fréchet-Hoeffding Inequality 31 1.8 Summary 32 Chapter 2 Optimization 35 2.1 Introduction 35 2.2 Unconstrained Optimization 36 2.2.1 Minima and Maxima of a Differentiable Function 37 2.2.2 Convex Functions 40 2.2.3 Quasiconvex Functions 46 2.3 Constrained Optimization 48 2.3.1 Lagrange Multipliers 49 2.3.2 Convex Programming 52 2.3.3 Linear Programming 55 2.3.4 Quadratic Programming 57 2.4 Summary 58 Chapter 3 Probability Metrics 61 3.1 Introduction 61 3.2 Measuring Distances: The Discrete Case 62 3.2.1 Sets of Characteristics 63 3.2.2 Distribution Functions 64 3.2.3 Joint Distribution 68 3.3 Primary, Simple, and Compound Metrics 72 3.3.1 Axiomatic Construction 73 3.3.2 Primary Metrics 74 3.3.3 Simple Metrics 75 3.3.4 Compound Metrics 84 3.3.5 Minimal and Maximal Metrics 86 3.4 Summary 90 3.5 Technical Appendix 90 3.5.1 Remarks on the Axiomatic Construction of Probability Metrics 91 3.5.2 Examples of Probability Distances 94 3.5.3 Minimal and Maximal Distances 99 Chapter 4 Ideal Probability Metrics 103 4.1 Introduction 103 4.2 The Classical Central Limit Theorem 105 4.2.1 The Binomial Approximation to the Normal Distribution 105 4.2.2 The General Case 112 4.2.3 Estimating the Distance from the Limit Distribution 118 4.3 The Generalized Central Limit Theorem 120 4.3.1 Stable Distributions 120 4.3.2 Modeling Financial Assets with Stable Distributions 122 4.4 Construction of Ideal Probability Metrics 124 4.4.1 Definition 125 4.4.2 Examples 126 4.5 Summary 131 4.6 Technical Appendix 131 4.6.1 The CLT Conditions 131 4.6.2 Remarks on Ideal Metrics 133 Chapter 5 Choice under Uncertainty 139 5.1 Introduction 139 5.2 Expected Utility Theory 141 5.2.1 St. Petersburg Paradox 141 5.2.2 The von Neumann–Morgenstern Expected Utility Theory 143 5.2.3 Types of Utility Functions 145 5.3 Stochastic Dominance 147 5.3.1 First-Order Stochastic Dominance 148 5.3.2 Second-Order Stochastic Dominance 149 5.3.3 Rothschild-Stiglitz Stochastic Dominance 150 5.3.4 Third-Order Stochastic Dominance 152 5.3.5 Efficient Sets and the Portfolio Choice Problem 154 5.3.6 Return versus Payoff 154 5.4 Probability Metrics and Stochastic Dominance 157 5.5 Summary 161 5.6 Technical Appendix 161 5.6.1 The Axioms of Choice 161 5.6.2 Stochastic Dominance Relations of Order n 163 5.6.3 Return versus Payoff and Stochastic Dominance 164 5.6.4 Other Stochastic Dominance Relations 166 Chapter 6 Risk and Uncertainty 171 6.1 Introduction 171 6.2 Measures of Dispersion 174 6.2.1 Standard Deviation 174 6.2.2 Mean Absolute Deviation 176 6.2.3 Semistandard Deviation 177 6.2.4 Axiomatic Description 178 6.2.5 Deviation Measures 179 6.3 Probability Metrics and Dispersion Measures 180 6.4 Measures of Risk 181 6.4.1 Value-at-Risk 182 6.4.2 Computing Portfolio VaR in Practice 186 6.4.3 Backtesting of VaR 192 6.4.4 Coherent Risk Measures 194 6.5 Risk Measures and Dispersion Measures 198 6.6 Risk Measures and Stochastic Orders 199 6.7 Summary 200 6.8 Technical Appendix 201 6.8.1 Convex Risk Measures 201 6.8.2 Probability Metrics and Deviation Measures 202 Chapter 7 Average Value-at-Risk 207 7.1 Introduction 207 7.2 Average Value-at-Risk 208 7.3 AVaR Estimation from a Sample 214 7.4 Computing Portfolio AVaR in Practice 216 7.4.1 The Multivariate Normal Assumption 216 7.4.2 The Historical Method 217 7.4.3 The Hybrid Method 217 7.4.4 The Monte Carlo Method 218 7.5 Backtesting of AVaR 220 7.6 Spectral Risk Measures 222 7.7 Risk Measures and Probability Metrics 224 7.8 Summary 227 7.9 Technical Appendix 227 7.9.1 Characteristics of Conditional Loss Distributions 228 7.9.2 Higher-Order AVaR 230 7.9.3 The Minimization Formula for AVaR 232 7.9.4 AVaR for Stable Distributions 235 7.9.5 ETL versus AVaR 236 7.9.6 Remarks on Spectral Risk Measures 241 Chapter 8 Optimal Portfolios 245 8.1 Introduction 245 8.2 Mean-Variance Analysis 247 8.2.1 Mean-Variance Optimization Problems 247 8.2.2 The Mean-Variance Efficient Frontier 251 8.2.3 Mean-Variance Analysis and SSD 254 8.2.4 Adding a Risk-Free Asset 256 8.3 Mean-Risk Analysis 258 8.3.1 Mean-Risk Optimization Problems 259 8.3.2 The Mean-Risk Efficient Frontier 262 8.3.3 Mean-Risk Analysis and SSD 266 8.3.4 Risk versus Dispersion Measures 267 8.4 Summary 274 8.5 Technical Appendix 274 8.5.1 Types of Constraints 274 8.5.2 Quadratic Approximations to Utility Functions 276 8.5.3 Solving Mean-Variance Problems in Practice 278 8.5.4 Solving Mean-Risk Problems in Practice 279 8.5.5 Reward-Risk Analysis 281 Chapter 9 Benchmark Tracking Problems 287 9.1 Introduction 287 9.2 The Tracking Error Problem 288 9.3 Relation to Probability Metrics 292 9.4 Examples of r.d. Metrics 296 9.5 Numerical Example 300 9.6 Summary 304 9.7 Technical Appendix 304 9.7.1 Deviation Measures and r.d. Metrics 305 9.7.2 Remarks on the Axioms 305 9.7.3 Minimal r.d. Metrics 307 9.7.4 Limit Cases of L∗p(X, Y) and Θ∗p(X, Y) 310 9.7.5 Computing r.d. Metrics in Practice 311 Chapter 10 Performance Measures 317 10.1 Introduction 317 10.2 Reward-to-Risk Ratios 318 10.2.1 RR Ratios and the Efficient Portfolios 320 10.2.2 Limitations in the Application of Reward-to-Risk Ratios 324 10.2.3 The STARR 325 10.2.4 The Sortino Ratio 329 10.2.5 The Sortino-Satchell Ratio 330 10.2.6 A One-Sided Variability Ratio 331 10.2.7 The Rachev Ratio 332 10.3 Reward-to-Variability Ratios 333 10.3.1 RV Ratios and the Efficient Portfolios 335 10.3.2 The Sharpe Ratio 337 10.3.3 The Capital Market Line and the Sharpe Ratio 340 10.4 Summary 343 10.5 Technical Appendix 343 10.5.1 Extensions of STARR 343 10.5.2 Quasiconcave Performance Measures 345 10.5.3 The Capital Market Line and Quasiconcave Ratios 353 10.5.4 Nonquasiconcave Performance Measures 356 10.5.5 Probability Metrics and Performance Measures 357 Index 361

Read more less

Book SynopsisThe latest edition goes beyond ho-hum analysis techniques and provides concrete problem solving. The text is sprinkled with real-world problems (and the analytical tools to solve them) that will be familiar to accounting professionals everywhere. A must-have for anyone looking to improve their company''s decision making . . . and their own role in it. George R. MacEachern President, Grosvenor Financial Services Steve Bragg has presented yet another comprehensive reference tool for the finance professional. Financial Analysis: A Controller''s Guide is the perfect reference guide for today''s controller, presenting not only traditional financial analysis information, but also various types of analyses that will benefit any type of organization. This book is a must-have for any financial professional desiring to make a relevant contribution to his/her organization. Jodi Nefzger, CPP Director of Finance, Masonic Home of Missouri Today''s proactive controllers Table of ContentsAbout the Author. Preface. PART ONE Overview. Chapter 1 Introduction. Chapter 2 The Role of Financial Analysis. PART TWO Financial Analysis. Chapter 3 Evaluating Capital Investments. Chapter 4 Evaluating Financing Options. Chapter 5 Evaluating Cash Flow. Chapter 6 Evaluating Acquisition Targets. Chapter 7 Increasing Shareholder Value. Chapter 8 Intangible Asset Measurement and Performance Enhancement. Chapter 9 Breakeven Analysis. Chapter 10 Business Cycle Forecasting. PART THREE Operational Analysis Chapter 11 Evaluating Management Performance. Chapter 12 Analyzing Process Cycles. Chapter 13 Product and Service Profitability Analysis. Chapter 14 Financial Analysis of Operational Topics. Chapter 15 Capacity Utilization Analysis. PART FOUR Other Analysis Topics. Chapter 16 Financial Analysis with an Electronic Spreadsheet. Chapter 17 “What If ” Analysis with an Electronic Spreadsheet. Chapter 18 Financial Analysis Reports. Chapter 19 Determining the Cost of Capital. Chapter 20 Analyzing Risk. APPENDICES. Appendix A Symptoms and Solutions. Appendix B Commonly Used Ratios. Index.

Read more less

Book SynopsisModeling and Forecasting Electricity Loads and Prices is the only book to provide original statistical tools that will enable readers to model electricity loads and prices. This book presents a common framework for modeling and forecasting two crucial processes for energy companies: electricity loads and prices.Table of ContentsPreface. Acknowledgments. 1 Complex Electricity Markets. 1.1 Liberalization. 1.2 The Marketplace. 1.2.1 Power Pools and Power Exchanges. 1.2.2 Nodal and Zonal Pricing. 1.2.3 Market Structure. 1.2.4 Traded Products. 1.3 Europe. 1.3.1 The England and Wales Electricity Market. 1.3.2 The Nordic Market. 1.3.3 Price Setting at Nord Pool. 1.3.4 Continental Europe 13. 1.4 North America. 1.4.1 PJM Interconnection. 1.4.2 California and the Electricity Crisis. 1.4.3 Alberta and Ontario. 1.5 Australia and New Zealand. 1.6 Summary. 1.7 Further Reading. 2 Stylized Facts of Electricity Loads and Prices. 2.1 Introduction. 2.2 Price Spikes. 2.2.1 Case Study: The June 1998 Cinergy Price Spike. 2.2.2 When Supply Meets Demand. 2.2.3 What is Causing the Spikes?. 2.2.4 The Definition. 2.3 Seasonality. 2.3.1 Measuring Serial Correlation. 2.3.2 Spectral Analysis and the Periodogram. 2.3.3 Case Study: Seasonal Behavior of Electricity Prices and Loads. 2.4 Seasonal Decomposition. 2.4.1 Differencing. 2.4.2 Mean or Median Week. 2.4.3 Moving Average Technique. 2.4.4 Annual Seasonality and Spectral Decomposition. 2.4.5 Rolling Volatility Technique. 2.4.6 Case Study: Rolling Volatility in Practice. 2.4.7 Wavelet Decomposition. 2.4.8 Case Study: Wavelet Filtering of Nord Pool Hourly System Prices. 2.5 Mean Reversion. 2.5.1 R/S Analysis. 2.5.2 Detrended Fluctuation Analysis. 2.5.3 Periodogram Regression. 2.5.4 Average Wavelet Coefficient. 2.5.5 Case Study: Anti-persistence of Electricity Prices. 2.6 Distributions of Electricity Prices. 2.6.1 Stable Distributions. 2.6.2 Hyperbolic Distributions. 2.6.3 Case Study: Distribution of EEX Spot Prices. 2.6.4 Further Empirical Evidence and Possible Applications. 2.7 Summary. 2.8 Further Reading. 3 Modeling and Forecasting Electricity Loads. 3.1 Introduction. 3.2 Factors Affecting Load Patterns. 3.2.1 Case Study: Dealing with Missing Values and Outliers. 3.2.2 Time Factors. 3.2.3 Weather Conditions. 3.2.4 Case Study: California Weather vs Load. 3.2.5 Other Factors. 3.3 Overview of Artificial Intelligence-Based Methods. 3.4 Statistical Methods. 3.4.1 Similar-Day Method. 3.4.2 Exponential Smoothing. 3.4.3 Regression Methods. 3.4.4 Autoregressive Model. 3.4.5 Autoregressive Moving Average Model. 3.4.6 ARMA Model Identification. 3.4.7 Case Study: Modeling Daily Loads in California. 3.4.8 Autoregressive Integrated Moving Average Model. 3.4.9 Time Series Models with Exogenous Variables. 3.4.10 Case Study: Modeling Daily Loads in California with Exogenous Variables. 3.5 Summary. 3.6 Further Reading. 4 Modeling and Forecasting Electricity Prices. 4.1 Introduction. 4.2 Overview of Modeling Approaches. 4.3 Statistical Methods and Price Forecasting. 4.3.1 Exogenous Factors. 4.3.2 Spike Preprocessing. 4.3.3 How to Assess the Quality of Price Forecasts. 4.3.4 ARMA-type Models. 4.3.5 Time Series Models with Exogenous Variables. 4.3.6 Autoregressive GARCH Models. 4.3.7 Case Study: Forecasting Hourly CalPX Spot Prices with Linear Models. 4.3.8 Case Study: Is Spike Preprocessing Advantageous?. 4.3.9 Regime-Switching Models. 4.3.10 Calibration of Regime-Switching Models. 4.3.11 Case Study: Forecasting Hourly CalPX Spot Prices with Regime-Switching Models. 4.3.12 Interval Forecasts. 4.4 Quantitative Models and Derivatives Valuation. 4.4.1 Jump-Diffusion Models. 4.4.2 Calibration of Jump-Diffusion Models. 4.4.3 Case Study: A Mean-Reverting Jump-Diffusion Model for Nord Pool Spot Prices. 4.4.4 Hybrid Models. 4.4.5 Case Study: Regime-Switching Models for Nord Pool Spot Prices. 4.4.6 Hedging and the Use of Derivatives. 4.4.7 Derivatives Pricing and the Market Price of Risk. 4.4.8 Case Study: Asian-Style Electricity Options. 4.5 Summary. 4.6 Further Reading. Bibliography. Index.

Read more less

Book SynopsisBusiness scandals are always with us from the South Sea Bubble to Enron and Parmalat. As accounting forms a central element of any business success or failure, the role of accounting is crucial in understanding business scandals. This book aims to explore the role of accounting, particularly creative accounting and fraud, in business scandals.Trade Review"AS A JOURNALIST I must confess I don't usually read the accounting books that drop onto my desk on a weekly basis but Michael Jones' hefty tome - Creative Accounting, Fraud and International Accounting Scandals - is different. Indeed, it is a rare thing in this sector, a real page turner." (Accountancy Age, November 2010) Table of ContentsList of Contributors xvii Preface xxiii Acknowledgements xxv Part A 1 1 Introduction – Setting the Scene 3Michael Jones 1.1 Introduction 3 1.2 Exploring the Terms 4 1.2.1 Creative Accounting 4 1.2.2 Fraud 7 1.2.3 Other Terms 9 1.3 Structure of the Book 11 1.3.1 Increase Income 12 1.3.2 Decrease Expenses 12 1.3.3 Increase Assets 12 1.3.4 Decrease Liabilities 12 1.4 Conclusion 18 2 The Creative Accounting and Fraud Environment 21Michael Jones 2.1 Introduction 21 2.2 The Main Actors 22 2.2.1 Managers 22 2.2.2 Investment Analysts 24 2.2.3 Regulators 24 2.2.4 Auditors 25 2.2.5 Shareholders 26 2.2.6 Merchant Banks 26 2.2.7 Other Users 27 2.2.8 Legal Authorities 27 2.3 Effective Corporate Governance 28 2.3.1 Effective Internal Controls 28 2.3.2 Division of the Responsibility between Chief Executive and Chairman 28 2.3.3 Audit Committee 28 2.3.4 Independent Board of Directors 28 2.4 Economic Environment 28 2.5 Conclusion 29 3 Motivations to Indulge in Creative Accounting and Fraud 31Michael Jones 3.1 Introduction 31 3.1.1 Personal Incentives 33 3.1.2 Market Expectations 34 3.1.3 Special Circumstances 36 3.1.4 Cover-up Fraud 39 3.2 Conclusion 39 4 Methods of Creative Accounting and Fraud 43Michael Jones 4.1 Introduction 43 4.2 Basic Principles 44 4.3 Nature of Accounting 45 4.4 Methods of Creative Accounting 45 4.4.1 Strategy 1: Increase Income 46 4.4.2 Strategy 2: Decrease Expenses 48 4.4.3 Strategy 3: Increase Assets 56 4.4.4 Strategy 4: Decrease Liabilities 58 4.4.5 Strategy 5: Increase Operating Cash Flow 60 4.5 Simple Numerical Example 61 4.6 Fraud 62 4.6.1 Misappropriation of Assets 64 4.6.2 Fictitious Transactions 65 4.7 Conclusion 67 5 Evidence for Creative Accounting and Fraud 69Michael Jones 5.1 Introduction 69 5.2 The Descriptive Studies 69 5.2.1 Ian Grif ths, Creative Accounting (1986) 71 5.2.2 County Natwest WoodMac, Company Pathology (1991) 72 5.2.3 UBS Phillips & Drew, Accounting for Growth (1991) 73 5.2.4 Trevor Pijper, Creative Accounting (1993) 76 5.2.5 Frank Clarke, Graeme Dean and Kyle Oliver, Corporate Collapse: Accounting, Regulatory and Ethical Failure (2003, rst issued 1997) 77 5.2.6 Frank Clarke and Graeme Dean, Indecent Disclosure: Gilding the Corporate Lily (2007) 78 5.2.7 McBarnet and Whelan, Creative Accounting and the Cross-eyed Javelin Thrower (1999) 78 5.2.8 Charles Mulford and Eugene Comiskey, The Financial Numbers Game (2002) 79 5.2.9 Beasley, Carcello and Hermanson, Fraudulent Financial Reporting 1987–1997: An Analysis of U.S. Public Companies (1999) 81 5.2.10 Joseph Wells, Principles of Fraud Examination (2005) 82 5.3 The Statistical Studies 84 5.3.1 Earnings Management Studies 84 5.4 Conclusion 93 6 Impression Management 97Michael Jones 6.1 Introduction 97 6.1.1 Accounting Narratives 97 6.1.2 Graphs 102 6.2 Conclusion 111 7 Taking the Long View: Accounting Scandals over Time 115Michael Jones 7.1 Introduction 115 7.1.1 Ancient and Medieval 117 7.1.2 Seventeenth and Eighteenth Centuries 118 7.1.3 Nineteenth Century 119 7.1.4 Twentieth Century: Before Second World War 122 7.1.5 Twentieth Century: 1945–1980s 127 7.2 Conclusion 132 Part B 135 8 Accounting Scandals in Australia since the Late 1980s 137Garry D. Carnegie and Brendan T. O’Connell 8.1 Introduction 137 8.2 Overview of Accounting Scandals during and since the 1890s 138 8.3 Case Studies of Accounting Scandals since the Late 1980s 141 8.3.1 Adelaide Steamship 142 8.3.2 Bond Corporation 143 8.3.3 Harris Scarfe 145 8.3.4 One.Tel 146 8.4 HIH Insurance 147 8.4.1 Background 148 8.4.2 Why did HIH Collapse? 149 8.4.3 Accounting Issues 150 8.4.4 Legal Outcomes Arising from the HIH Collapse 152 8.5 Corporate Governance Reforms Following the Accounting Scandals of the Early 2000s 155 8.6 Conclusion 156 9 Corporate Accounting Scandals in China 163Catherine Huirong Chen, Yuanyuan Hu and Jason Zezhong Xiao 9.1 Introduction 163 9.2 Summary of Corporate Scandals 164 9.2.1 Shenzhen Yuanye 164 9.2.2 Great Wall Fund Raising 166 9.2.3 Hongguang 167 9.2.4 Daqing Lianyi 168 9.2.5 Kangsai Group 169 9.2.6 Lantian Gufen 170 9.3 A Case in Depth – Zhengzhou Baiwen 172 9.3.1 Background 172 9.3.2 Themes of the Scandal 174 9.3.3 Who is to Blame? 176 9.3.4 Consequences of the Baiwen Scandal 178 9.3.5 Aftermath 179 9.4 Conclusion 180 10 Accounting Scandals in Germany 185Hansrudi Lenz 10.1 Introduction 185 10.2 Accounting Scandals Between 1985 and 2006 186 10.2.1 Co op AG (1988) 186 10.2.2 Balsam AG (1994) 187 10.2.3 Bremer Vulkan Verbund AG (1995) 189 10.2.4 Philipp Holzmann AG (1999) 191 10.3 Most Important Cases: Flowtex and Comroad 193 10.3.1 Flowtex Gmbh & Co. KG (2000) 193 10.3.2 ComRoad AG (2001) 195 10.4 Accounting Scandals and Regulatory Responses 200 10.5 Examinations of the German Financial Reporting Enforcement Panel 2005–2006 202 10.6 Conclusion 208 11 Creative Accounting and Fraud in Greece 211George Kontos, Maria Krambia-Kapardis and Nikolaos Milonas 11.1 Introduction 211 11.2 Two Accounting Scandals 213 11.2.1 ETBA Finance 213 11.2.2 Dynamic Life 217 11.3 The Bank of Crete Scandal 220 11.3.1 Koskotas’s Employment with the Bank of Crete 221 11.3.2 The Accounting Information Systems of the Time 223 11.3.3 The Economic Environment at that Time 225 11.4 The Aftermath 229 11.5 Conclusions 231 12 Corporate Creative Accounting in India: Extent and Consequences 233Bhabatosh Banerjee 12.1 Introduction 233 12.2 Some Examples of Creative Accounting in India 234 12.3 Some Important Corporate Cases in India 239 12.4 The Satyam Computer Services Ltd Scandal (2009) 240 12.4.1 Background 240 12.4.2 Satyam: A Global Organisation 240 12.4.3 Alleged Possible Processes and their Impact 241 12.4.4 Good Guy, Bad Choices 243 12.4.5 Role of the Auditors 243 12.4.6 Institution of Legal Proceedings 245 12.4.7 Salvaging Satyam 245 12.4.8 Rebuilding the Corporate Image 246 12.4.9 Some Antidotes 247 12.5 Aftermath 247 12.5.1 Changes in the Companies Act 247 12.5.2 Measures Taken by the SEBI 248 12.5.3 Prudential Norms of the RBI 249 12.6 Conclusion 250 12.7 Acknowledgements 251 13 Creative Accounting and Accounting Scandals in Italy 253Andrea Melis 13.1 Introduction 253 13.2 Creative Accounting Practices in Italy: A Case Study Analysis 255 13.2.1 The Choice of Consolidation Technique 255 13.2.2 The Accounting of Stock Options 256 13.2.3 The Accounting of ‘Creative Gains’ in Football Club Companies 257 13.3 The Most Important Accounting Fraud in Italy: The Parmalat Case 259 13.3.1 Parmalat: Was it a Case of Creative Accounting or of False Accounting? 260 13.3.2 Key Accounting Issues at Parmalat: Some Examples of the Accounting Fraud 261 13.3.3 The Role of Corporate Governance Actors 265 13.3.4 The Role of Information Demand-side Actors: Institutional Investors, Financial Analysts and Banks 271 13.4 The Aftermath of the Parmalat Scandal and its Impact on Business and Society 272 13.5 Conclusion 274 14 Creative Accounting and Accounting Scandals in Japan 279Kazuyuki Suda 14.1 Introduction 279 14.2 Accounting Regulations and Standards in Japan 280 14.2.1 Accounting Regulations 280 14.2.2 Accounting Standards 280 14.3 Short History of Accounting Scandals Before the 1980s 281 14.4 Three Types of Accounting Scandal Post-1980s 283 14.4.1 Accounting Scandal to Maintain High Share Prices 285 14.4.2 Accounting Scandal Related to Contracts 289 14.4.3 Accounting Scandal to Avoid Bankruptcy 292 14.5 Consequences of the Accounting Scandals 296 14.5.1 Revision of Accounting Standards for Consolidated Financial Statements 296 14.5.2 Reorganization of Audit Firms 296 14.5.3 Establishing Internal Control Systems 297 14.6 Conclusion 298 15 Financial Accounting Scandals in the Netherlands 305Henk Langendijk 15.1 Introduction 305 15.2 Some Minor Accounting Scandals 307 15.2.1 Creative Accounting at Rijn-Schelde-Verolme (RSV) 307 15.2.2 Creative Accounting at Fokker 309 15.3 Royal Ahold 310 15.3.1 Consolidation of Joint Ventures at Royal Ahold 310 15.3.2 Consolidation Accounting in the Netherlands 311 15.3.3 Consolidation Accounting under US GAAP 311 15.3.4 The Control and Side Letters 312 15.3.5 Accounting for Vendor Allowances at US Foodservice (USF) 315 15.3.6 Proper Accounting Treatment Vendor Allowances 315 15.3.7 Measures Taken by Royal Ahold after Discovering the Fraud 318 15.3.8 Acquisition Accounting 319 15.3.9 Reserves, Allowances and Provisions 320 15.3.10 Lease Accounting 320 15.4 Conclusion 320 16 Creative Accounting and Financial Scandals in Spain 325Nieves Carrera 16.1 Introduction 325 16.2 Accounting Scandals in Spain Since the 1980s 326 16.2.1 The Banking Sector 327 16.2.2 Investment Service Firms 330 16.2.3 The Real Estate Sector: The Case of PSV and IGS 332 16.3 Investments in Stamps: The Latest Series of Financial Scandals in the Country. Afinsa and Fórum Filatélico 333 16.3.1 Background of the Cases of Afinsa and Fórum Filatélico 334 16.3.2 The Nature of the Businesses and the Accounting for Investment Contracts 335 16.3.3 The Suppliers 337 16.3.4 Valuation of Stamps 339 16.3.5 Reflections on the Scandal 340 16.3.6 Where were the Auditors? 341 16.3.7 Was it a Surprise? 341 16.3.8 Consequences of the Scandal 343 16.4 The Aftermath of the Scandals 344 16.5 Conclusion 346 17 Accounting Scandals in Sweden – A Long Tradition 359Gunnar Rimmel and Kristina Jonäll 17.1 Introduction 359 17.2 Fermenta and Prosolvia: Swedish Stock Market Darlings 360 17.2.1 Fermenta – 1980s Biotech Company’s Accounting Errors 360 17.2.2 Prosolvia – 1990s Experts in Simulating Virtual Reality? 363 17.2.3 Reconstruction of Ownership 364 17.2.4 Fictitious Invoices, Invented Agreements and Premature Income Recognition 364 17.2.5 Insider Trading 365 17.3 Two Scandals in Multinationals that Dominated the Swedish Media 365 17.3.1 ABB – Shaken and Stirred 365 17.3.2 Skandia – A Shooting Star Turns into a White Dwarf 368 17.4 Conclusions 373 18 Creative Accounting – The UK Experience 379David Gwilliam and Richard H.G. Jackson 18.1 Introduction 379 18.2 Historical Background 381 18.3 Some Recent Accounting Scandals 382 18.3.1 Bank of Credit and Commerce International (BCCI) 383 18.3.2 The Mirror Group 385 18.4 Polly Peck 386 18.4.1 Meyna 389 18.4.2 Vestel 390 18.4.3 Unipac 390 18.4.4 Accounting Policies at Polly Peck 391 18.5 The Immediate Aftermath 398 18.5.1 Accounting Regulatory Change 398 18.5.2 Governance and Enforcement 400 18.6 Subsequent Developments 400 18.7 Conclusions 402 18.8 Acknowledgements 404 19 Creative Accounting and Accounting Scandals in the USA 407Charles W. Mulford and Eugene E. Comiskey 19.1 Introduction 407 19.2 Scandals since the 1990s 410 19.2.1 Premature or Fictitious Revenue Recognition 410 19.2.2 Capitalized Costs and/or Extended Amortization Periods 412 19.2.3 Overstated Assets and/or Understated Liabilities 416 19.2.4 Other Creative Accounting Practices 416 19.3 Enron and Worldcom 419 19.3.1 Enron Corp. 419 19.3.2 WorldCom, Inc. 421 19.4 Aftermath of the Scandals 423 20 Bank Failures and Accounting During the Financial Crisis of 2008–2009 425Simon D. Norton 20.1 Introduction 425 20.2 428 20.2.1 Kaupthing Bank 428 20.2.2 Northern Rock 429 20.3 Origins of the ‘Credit Crunch’ 430 20.3.1 Sub-prime Lending 430 20.3.2 Types of Mortgage 432 20.3.3 Economic Downturn and Rising Unemployment 432 20.4 Financial Instruments Associated with the Credit Crunch 432 20.4.1 Collateralised Debt Obligations (CDOs) 433 20.4.2 Credit Default Swaps (CDS) 433 20.4.3 Collateralised Mortgage Obligations (CMOs) 434 20.4.4 Securitisation and Off-balance Sheet Financing 434 20.4.5 Repurchase agreements or ‘repos’ 436 20.5 Creative Accounting in the Banking Sector 437 20.5.1 Loan-loss Allowances 437 20.5.2 Adjustment of Reporting Dates 437 20.5.3 Enhancing Pro ts through Disposals of Assets 438 20.5.4 Lawful Adjustments to Composition of ‘Level 3’ Assets in Banks’ Balance Sheets 438 20.5.5 Decline in Value of Outstanding Debt 439 20.6 Lehman’s, Madoff and Bear Stearns; Failures and Consequences 440 20.6.1 Lehman Brothers 440 20.6.2 Bernard Madoff 445 20.6.3 Bear Stearns 448 20.7 Conclusion 450 Part C 453 21 Identifying Some Themes 455Michael Jones 21.1 Introduction 455 21.2 Some Themes 455 21.2.1 Background 455 21.2.2 Creative Accounting or Fraud 459 21.3 The Major Methods Used 460 21.3.1 Strategy 1: Increasing Income 461 21.3.2 Strategy 2: Decreasing Expenses 462 21.3.3 Strategy 3: Increasing Assets 464 21.3.4 Strategy 4: Decreasing Liabilities 465 21.3.5 Other Methods of Creative Accounting 466 21.4 Methods of Fraud 467 21.5 Incentives for Creative Accounting and Fraud 471 21.6 Overstrong Personalities 473 21.7 Failure of Internal Controls 474 21.8 Failure of External Auditors 475 21.9 Conclusion 477 22 The Impact of Accounting Scandals and Creative Accounting 479Michael Jones 22.1 Introduction 479 22.2 Short-term Immediate Effects 479 22.2.1 Insiders 480 22.2.2 Outsiders 481 22.3 Long-term Effects 484 22.3.1 One-off Regulatory Responses 484 22.4 Cumulative Effects 487 22.5 Conclusion 490 23 Conclusion – Looking Backwards and Forwards 493Michael Jones 23.1 Overview 493 23.2 Thematic Analysis 496 23.3 Lessons for the Future 499 23.3.1 Factors Increasing the Possibilities of Creative Accounting and Fraud 499 23.3.2 Factors Reducing the Potential for Creative Accounting and Fraud 501 23.4 Prognosis 505 23.5 Conclusion 506 Appendix 1 Chronological List of Major Instances of Accounting Issues Across 12 Countries and Beyond 509 Appendix 2 Alphabetical List of Most Important Accounting Scandals Across 12 Countries and Beyond since about 1980 519 Index 535

Read more less

Book SynopsisMacrofinancial risk analysis Dale Gray and Samuel Malone Macrofinancial Risk Analysis provides a new and powerful framework with which policymakers and investors can analyze risk and vulnerability in economies, both emerging market and industrial.Trade Review"...compelling" (Risk, November 2008)Table of ContentsForeword xv Preface xix 1 Introduction 1 Part I Overview of Finance, Macroeconomics, and Risk Concepts 7 2 An Overview of Macroeconomics, and Why the Theory of Asset Pricing and Contingent Claims Should Shape its Future 9 2.1 An overview of macroeconomics 10 2.2 How uncertainty is incorporated into macroeconomic models 13 2.3 Missing components in macro models: balance sheets with risk, default, and (nonlinear) risk exposures 15 2.4 Asset-pricing theory, financial derivatives pricing, and contingent claims analysis 17 2.5 Autoregression in economics vs. random walks in finance 19 2.6 Asset price process related to a threshold or barrier 21 2.7 Relating finance models and risk analytics to macroeconomic models 23 2.8 Toward macrofinancial engineering 24 2.9 Summary 25 References 26 3 Macroeconomic Models 29 3.1 The Hicks–Hansen IS-LM model of a closed economy 29 3.2 The Mundell–Fleming model of an open economy 33 3.3 A dynamic, stochastic, five-equation, small open economy macro model 38 3.4 Summary 42 References 42 4 Stochastic Processes, Asset Pricing, and Option Pricing 43 4.1 Stochastic processes 43 4.2 Itô’s lemma 46 4.3 Asset pricing: Arrow–Debreu securities and the replicating portfolio 47 4.4 Put and call option values 48 4.5 Pricing the options using the Black–Scholes–Merton formula 50 4.6 Market price of risk 52 4.7 Implications of incomplete markets for pricing 54 4.8 Summary 55 Appendix 4A Primer on relationship of put, call, and exchange options 55 Appendix 4B Physics, Feynman, and finance 57 References 57 5 Balance Sheets, Implicit Options, and Contingent Claims Analysis 59 5.1 Uncertain assets and probability of distress or default on debt 59 5.2 Probability of distress or default 60 5.3 Debt and equity as contingent claims 61 5.4 Payoff diagrams for contingent claims 62 5.5 Understanding why an implicit put option equals expected loss 63 5.6 Using the Merton model and Black–Scholes–Merton formula to value contingent claims 64 5.7 Measuring asset values and volatilities 68 5.8 Estimating implied asset value and asset volatility from equity or junior claims 68 5.9 Risk measures 71 5.10 Summary 72 References 72 6 Further Extensions and Applications of Contingent Claims Analysis 73 6.1 Extensions of the Merton model 73 6.2 Applications of CCA with different types of distress barriers and liability structures 74 6.3 Risk-adjusted and actual probabilities using the market price of risk, Sharpe ratios, and recovery rates 78 6.4 Moody’s-KMV approach 80 6.5 CCA using skewed asset distributions modeled with a mixture of lognormals 81 6.6 Maximum likelihood methods 84 6.7 Incorporating stochastic interest rates and interest rate term structures into structural CCA balance sheet models 85 6.8 Other structural models with stochastic interest rates 86 6.9 Summary 87 Appendix 6A Calculating parameters in the Vasicek model 87 References 88 Part II the Macrofinance Modeling Framework 91 7 The Macrofinance Modeling Framework: Interlinked Sector Balance Sheets 93 7.1 Contingent claim balance sheets for sectors 93 7.2 Measuring asset values and volatilities 98 7.3 Measuring risk exposures 100 7.4 Linkages in a simple four-sector framework 100 7.5 Integrated value and risk transmission between sectors 101 7.6 Policy effectiveness parameters in implicit options 105 7.7 Advantages of an integrated balance sheet risk approach 106 7.8 Summary 106 References 107 8 The Macrofinance Modeling Framework: A Closer Look at the Sovereign CCA Balance Sheet 109 8.1 CCA balance sheet for the government and monetary authorities 109 8.2 Sovereign distress 111 8.3 Calculating implied sovereign assets and implied sovereign asset volatility using CCA for the public sector balance sheet 111 8.4 Applications of the macrofinancial risk framework to sovereigns 115 8.5 Sovereign risk-neutral and estimated actual default probabilities on foreign-currency-denominated debt 117 8.6 Spreads on sovereign foreign currency and local currency debt 118 8.7 Breaking down sovereign assets into key components 122 8.8 Risk-based scenario and policy analysis using calibrated sovereign CCA related to spreads on foreign currency debt 123 8.9 Short-term and long-term government CCA balance sheets with monetary authority 124 8.10 Summary 126 Appendix 8A Value and volatility of local currency liabilities and base money 126 References 127 9 The Macrofinance Modeling Framework: Linking Interest Rate Models in Finance and Macroeconomics 129 9.1 Overview of interest rate term structure models in finance 129 9.2 Two early theories: liquidity preference and the market for loanable funds 131 9.3 Monetary policy, Taylor rules, and interest rates 131 9.4 Reconciling different perspectives on interest rate behavior 133 9.5 What to do when the monetary authority is linked closely to the government balance sheet 135 9.6 Summary 136 References 137 10 Macrofinance Modeling Framework: Financial Sector Risk and Stability Analysis 139 10.1 Calculating risk indicators for individual banks or financial institutions 139 10.2 Time series of financial system risk indicators 140 10.3 Snapshot of system risk 145 10.4 Expected loss as a portfolio of implicit put options 146 10.5 Using a structural Merton model with stochastic interest rates for capital adequacy estimates 149 10.6 Factor model to assess key drivers of system risk and for scenario analysis 150 10.7 Multifactor risk analysis using copulas 152 10.8 Household balance sheet risk 152 10.9 Linking banking sector loans to corporate, household, and other borrowers 153 10.10 Foreign-currency-denominated loans and the impact of the presence of foreign banks on banking system risk 154 10.11 CCA models, financial stability indicators and links to macro models 155 10.12 Summary 159 Appendix 10A CCA model for banks and borrowers with foreign-currency-denominated debt and lending spreads based on credit risk 160 References 161 11 Macrofinancial Modeling Framework: Extensions to Different Exchange Rate Regimes 163 11.1 Floating exchange rate regimes, interest rates, and the sovereign balance sheet 163 11.2 Fixed exchange rate regimes, interest rates and the sovereign balance sheet 167 11.3 The impact of capital flows on the CCA sovereign balance sheet 172 11.4 Role of quasi-public entities in exchange rate management 173 11.5 Summary 174 References 174 Part III Linking Macrofinancial and Macroeconomic Frameworks 175 12 Sovereign Reserve, Debt, and Wealth Management from a Macrofinancial Risk Perspective 177 12.1 Reserves adequacy and asset allocation: moving from simple rules to a national framework 177 12.2 CCA for a firm with a subsidiary and its wealth management 179 12.3 Constructing contingent claim balance sheets for the national economy 180 12.4 Macro risk and wealth management 181 12.5 Summary 184 References 185 13 Macrofinancial Modeling Framework: Relationship to Accounting Balance Sheets and the Flow of Funds 187 13.1 Economy-wide macro contingent claim balance sheets and risk exposures 187 13.2 Recovering traditional macroeconomic budget constraints and flow identities from CCA valuation equations when volatility is zero 191 13.3 Interlinkages between CCA balance sheets, flows, and risk premiums 195 13.4 Using the production function to link corporate and household assets 197 13.5 Macrofinance, macroeconomic flows, and the business cycle 198 13.6 Summary 199 Appendix 13A Cross-holding by households and financial sectors of contingent claims in other sectors 200 Appendix 13B Contingent claim values and returns of different sectors 201 References 202 14 Macrofinancial Risk Framework Linked to Macroeconomic Models 203 14.1 Adding risk analytics to the spectrum of macroeconomic models 203 14.2 The Mundell–Fleming model and default risk 204 14.3 Linking macrofinance outputs to DSGE models 206 14.4 Linking macrofinance outputs to dynamic, stochastic macroeconomic policy models 208 14.5 Linking macrofinance outputs to macroeconometric VAR models 215 14.6 An integrated policy framework 216 14.7 Summary 217 References 217 Part IV Crisis and Distress in Economies 219 15 Macroeconomic Models vs. Crisis Models: Why Nonlinearity Matters 221 15.1 Recent financial crises and crisis models 222 15.2 Summary 229 References 229 16 Sensitivity Analysis, Destabilization Mechanisms, and Financial Crises 231 16.1 Sensitivity analysis, the “Greeks”, and the valuation multiplier effect 232 16.2 The volatility leverage effect 236 16.3 Feedback between the forward rate and domestic interest rates on local currency debt 237 16.4 Feedback between local currency debt issuance and local currency spreads in the presence of contingent liability constraints 241 16.5 Summary 244 References 245 17 The Case of Thailand, 1996–1999 247 17.1 Background 247 17.2 A macrofinance analysis of the Thai crisis 249 17.3 Scenario analysis 253 17.4 Summary 255 Appendix 17A Banking and corporate sector risk analysis with scenarios 257 References 258 18 The Brazil Crisis of 2002–2003 259 18.1 Background 259 18.2 A macrofinance analysis of the Brazil crisis 261 18.3 Summary 266 References 266 Part V Macrofinancial Model Applications and Analytical Issues 267 19 International Shocks, Risk Transmission, and Crisis Prevention: Backdrop for Understanding the 2007–08 Global Financial Credit Turmoil 269 19.1 Changing global environment and global risk 270 19.2 Types of global shocks and the interaction with macrofinancial risk models 277 19.3 The international financial system and crisis prevention 281 19.4 Structuring an effective risk-management hierarchy from the international level down to the country authorities 282 19.5 Summary 283 References 283 20 Macro Risk Management: Ways to Mitigate, Control, and Transfer Risk in the Economy 285 20.1 Overview of ways to manage risk 285 20.2 Direct change in financial structure 287 20.3 Risk transfer 288 20.4 Management of guarantees 290 20.5 Longer-term risk management via institutional and policy change 293 20.6 Summary 294 References 294 21 Integrated Framework for Corporate and Sovereign Relative Value and Capital Structure Arbitrage 297 21.1 Capital structure arbitrage for firms and financial institutions 297 21.2 Credit and equity cycles 299 21.3 Sovereign capital structure relative value 300 21.4 Summary 302 References 302 22 Conclusions and New Directions for Macrofinance 303 22.1 Summary of conceptual issues 303 22.2 The roadmap for an integrated contingent claims analysis-macroeconomic Model 306 Reference 309 Appendix A Mundell–Fleming with a Risk Premium 311 A. 1 The model 311 A. 2 Equilibrium 315 A. 3 Monetary and fiscal policy 317 A. 4 Summary 321 References 322 Index 323

Read more less

Book SynopsisThis book provides a secure grounding in the theory and practice of finance insofar as it deals with pension matters.Trade Review"Informative without being patronizing and set out in a logical sequence with each chapter containing questions to help the reader consolidate what they have just learnt." (Pensions Age, December 2006) “What makes this book unique is the discussion of many pension specific subjects that are not covered in other books.” (Investments & Pensions Europe, March 2007) "...this book provides a comprehensive and secure grounding in the theory and practice of finance." (Pensions World, July 2007) Table of ContentsPreface. 1 Investment Assets.Held by Pension Funds. 1.1 Money-market securities. 1.2 Bonds and loans. 1.3 Shares. 1.4 Collective investment vehicles. 1.5 Real assets. 1.6 Derivatives. 1.7 Alternative investments. 1.8 Socially responsible investment. 1.9 Global custody. 1.10 Different asset characteristics and uses. 1.11 Conclusion. Questions. References. Appendix A: Standard deviation, value-at-risk and correlation. 2 Personal Finance: The Allocation of Personal Wealth to Different Asset Classes. 2.1 Introduction. 2.2 Modelling the allocation of personal wealth to different asset classes. 2.3 Conclusion. Questions. References. 3 Corporate Pension Finance. 3.1 The valuation of pension liabilities: Differences between the actuarial and economic approaches. 3.2 Pensions and the company balance sheet: Differences between the accounting and economic approaches. 3.3 The asset allocation of the pension fund. 3.4 The relationship between the pension fund and the sponsoring company’s profitability, credit rating and share price. 3.5 Conclusion. Questions. References. 4 Defined Contribution Pension Schemes – The Accumulation Phase. 4.1 The optimal design of DC schemes during the accumulation phase. 4.2 Charges. 4.3 Persistency. 4.4 Conclusions. Questions. Appendix A: Charges. References. 5 Defined Contribution Pension Schemes – The Distribution Phase. 5.1 Annuities. 5.2 The optimal design of DC schemes during the distribution phase. 5.3 Conclusion. Questions. References. 6 Defined Benefit Pension Schemes. 6.1 Types of defined benefit scheme. 6.2 Defined benefit liabilities. 6.3 The option composition of pension schemes. 6.4 Valuing the options. 6.5 The pension scheme preferences of members, sponsors and fund managers. 6.6 Conclusion. Questions. References. 7 Pension Fund Management. 7.1 The role of a pension fund. 7.2 The functions of a pension fund manager. 7.3 Fund management styles. 7.4 Different fund management strategies for defined benefit and defined contribution schemes. 7.5 The fund manager’s relationship with the trustees. 7.6 Passive fund management. 7.7 Active fund management. 7.8 Asset-liability management. 7.9 The Myners review of institutional investment. 7.10 Conclusion. Questions. References. Appendix A: Investment-objectives questionnaire. Appendix B: Derivation of the optimal contribution rate and asset allocation in a defined benefit pension fund. 8 Pension Fund Performance Measurement and Attribution. 8.1 Ex-post returns. 8.2 Benchmarks of comparison for actively managed funds. 8.3 Risk-adjusted measure of portfolio performance for actively managed funds. 8.4 Performance attribution for actively managed funds. 8.5 Liability-driven performance attribution. 8.6 Realised investment performance. 8.7 Performance-related fund management fees. 8.8 How frequently should fund managers be assessed?. 8.9 Conclusions. Questions. References. Appendix A: Deriving the power function. 9 Risk Management in Pension Funds. 9.1 The objective of hedging. 9.2 Hedging with futures. 9.3 Hedging with options. 9.4 Hedging with swaps. 9.5 Hedging longevity risk. 9.6 Conclusion. Questions. References. 10 Pension Fund Insurance. 10.1 The Pension Protection Fund. 10.2 What the Pension Protection Fund can learn from other financial institutions and compensation schemes. 10.3 The risks facing the PPF. 10.4 Dealing with these risks. 10.5 Conclusion. Questions. References. Appendix A: The Marcus (1987) and Vanderhei (1990) models. Appendix A: Financial Arithmetic. Appendix B: Yields and Yields Curves. Appendix C: Duration and Convexity. Index.

Read more less

Book SynopsisWhile not attempting to train readers as professional economists, Pension Economics aims to provide a secure grounding in the theory and practice of economics insofar as it deals with pension matters.Trade Review"I have never seen such a concise description of pension institutions that was so crystal clear." (Investments & Pensions Europe, February 2007) "Informative without being patronizing and set out in a logical sequence with each chapter containing questions to help the reader consolidate what they have just learnt." (Pensions Age, December 2006) "If you are looking for a solid grounding in the theory and practice of economics in relation to pensions this is a vital addition to your bookshelf." (.net, August 2007)Table of ContentsPreface xi 1 Introduction 1.1 What is pension economics? 1 1.2 Types of pension scheme 3 1.3 Conclusions 10 Questions 10 References 11 2 Individual Pension Decision Making 13 2.1 The lifecycle model 13 2.2 Pensions and savings 19 2.2.1 Unfunded state pension 19 2.2.2 Private funded pension 20 2.3 Pensions and retirement decisions 23 2.3.1 No pension 23 2.3.2 Private funded pension 24 2.3.3 Unfunded state pension 25 2.3.4 Unfunded state pension with private funded pension 26 2.4 Empirical studies testing the validity of the lifecycle model 28 2.5 The Feldstein lifecycle model with induced retirement 30 2.5.1 The consumption decision 32 2.5.2 Retirement behaviour 37 2.5.3 Discussion 38 2.6 Conclusions 39 Questions 40 References 41 3 Corporate Pension Decision Making 47 3.1 The provision of pensions by corporations 47 3.2 The role of pensions in employment contracts 48 3.2.1 Pensions as altruism 48 3.2.2 Pensions as deferred pay 49 3.2.3 Pensions as contingent claims 60 3.3 The nature of corporate pension liabilities 61 3.4 Quitting and mandatory retirement 64 3.4.1 Quitting 64 3.4.2 Mandatory retirement 66 3.5 Tax and pension fund policy 68 3.6 Agency costs in pension schemes and pension funds 71 3.6.1 Insider-trustees 72 3.6.2 Underfunding the pension scheme 75 3.6.3 Performance-related fund management fees 80 3.6.4 Shareholder activism and corporate governance 81 3.6.5 Moral hazard, adverse selection and disability pensions 82 3.7 Conclusions 83 Questions 84 References 85 4 Pensions in the Diamond–Samuelson Overlapping Generations Model with Certain Lifetimes 89 4.1 The two-period Diamond–Samuelson OLG model 90 4.1.1 Individuals 91 4.1.2 Firms 98 4.1.3 Market equilibrium 100 4.1.4 Dynamics, stability and the steady state 101 4.1.5 Optimality and efficiency 103 4.2 Pensions in the Diamond–Samuelson OLG model with exogenous labour supply and retirement 105 4.2.1 State pension scheme 106 4.2.2 The equivalence of PAYG and government debt 117 4.2.3 Transitional and welfare effects 120 4.2.4 From PAYG to a funded pension scheme 121 4.3 PAYG pensions in the Diamond–Samuelson OLG model with endogenous labour supply and retirement 122 4.3.1 Individuals 122 4.3.2 Market equilibrium 125 4.3.3 The steady state 126 4.3.4 Welfare effects 129 4.3.5 From PAYG to a funded pension scheme 132 4.4 Conclusions 132 Questions 133 References 135 5 Pensions in the Blanchard–Yaari Overlapping Generations Model with Uncertain Lifetimes 137 5.1 The Blanchard–Yaari OLG model with uncertain lifetimes 137 5.1.1 Yaari’s contribution 137 5.1.2 Blanchard’s contribution 142 5.1.3 Individuals 142 5.1.4 Aggregate consumption 144 5.1.5 Firms 147 5.1.6 Government and market equilibrium 148 5.1.7 The phase diagram 149 5.2 PAYG pensions in the Blanchard–Yaari OLG model with endogenous labour supply and mandatory retirement 152 5.3 Conclusions 154 Questions 155 References 156 6 The Economics of Ageing and Generational Accounting 157 6.1 The macroeconomic effects of ageing: Declining population growth and the increasing dependency ratio 157 6.2 Pensions in the Diamond–Samuelson OLG model with a variable population growth rate 161 6.3 Generational accounting 164 6.4 Conclusions 167 Questions 168 References 168 7 Risk Sharing and Redistribution in Pension Schemes 171 7.1 Risks in private pension schemes 174 7.2 Risk sharing in personal pension schemes 175 7.3 Risk sharing in occupational pension schemes 177 7.3.1 Complete markets 178 7.3.2 Incomplete markets 180 7.4 Redistribution in private pension schemes 188 7.5 Private sector market failure and the compensating role of state pension schemes 191 7.6 Risks in state pension schemes 192 7.7 Risk sharing in state pension schemes 196 7.7.1 The family 197 7.7.2 Social security pension system 198 7.8 Redistribution in state pension schemes 206 7.9 The viability of PAYG state pension systems and the transition costs to funding 206 7.9.1 Viability 206 7.9.2 The transition deficit 210 7.10 Conclusions 213 Questions 215 References 217 8 Behavioural Pension Economics 221 8.1 The accumulation phase 222 8.1.1 The savings decision 222 8.1.2 The investment decision 227 8.2 The decumulation phase 238 8.2.1 Longevity risk 238 8.2.2 Inflation and capital market risk 239 8.3 Conclusions 240 Questions 242 References 243 Index 249

Read more less

Book SynopsisThis is one of the first books that describe all the steps that are needed in order to analyze, design and implement Monte Carlo applications. It discusses the financial theory as well as the mathematical and numerical background that is needed to write flexible and efficient C++ code using state-of-the art design and system patterns, object-oriented and generic programming models in combination with standard libraries and tools. Includes a CD containing the source code for all examples. It is strongly advised that you experiment with the code by compiling it and extending it to suit your needs. Support is offered via a user forum on www.datasimfinancial.com where you can post queries and communicate with other purchasers of the book. This book is for those professionals who design and develop models in computational finance. This book assumes that you have a working knowledge of C ++.

Read more less

Book SynopsisEffectively implement comprehensive anti-money laundering regulations Handbook of Anti-Money Laundering details the most up-to-date regulations and provides practical guidance toward implementation. While most books focus on the regulations themselves, this useful guide goes further by explaining their meaning to bank operations, and how the rules apply to real-life scenarios. The international perspective provides a broader understanding of the anti-money laundering controls that are in place worldwide, with certain country-specific details discussed in-depth. Coverage includes the Wolfsberg Principles, Financial Action Task Force guidance, the U.S. Patriot Act, and the latest from both the EU and Bank for International Settlements. The IMF estimates that two to five per cent of the global GDP $590 billion to $1.5 trillion is laundered every year. Globally, banks and other financial institutions have been required to put in place specific arrangements to preTrade Review“… a must-have for banking employees involved in compliance / other ML activities" (Financial Expert, May 2015)Table of ContentsIntroduction 1 1 What is Money Laundering? 5 2 The Process of Money Laundering 15 3 International Money-laundering Regulation – The Role of the Financial Action Task Force 21 4 The EC Money Laundering Directives 59 5 UN Resolutions 79 6 The UK Regulatory Framework 83 7 How Money-laundering-deterrence Regulations are Applied in the UK – The Joint Money Laundering Steering Group 93 8 The Wolfsberg Principles 111 9 The US Regulatory Framework 127 10 Financial Sanctions 139 11 Risk Management and Money-laundering Deterrence 149 12 The Role of the Money Laundering Reporting Officer 159 13 Know Your Customer 169 14 Money Laundering Training 181 15 Retail Customer Identification 189 16 Corporate Customer Identification 199 17 Politically Exposed Persons 207 18 Non-face-to-face Customers 217 19 Suspicious Conduct and Transactions 225 20 Unusual Transactions 235 21 Investigating Suspicions 241 22 Ongoing Monitoring 253 23 Tipping Off 261 24 Correspondent Banking 265 25 Record-keeping 271 26 Money-laundering-deterrence Software 277 27 Country Profiles 285 27.1 Country Profile: Albania 286 27.2 Country Profile: Argentina 298 27.3 Country Profile: Australia 308 27.4 Country Profile: Bahamas 322 27.5 Country Profile: Barbados 335 27.6 Country Profile: Brazil 348 27.7 Country Profile: British Virgin Islands 355 27.8 Country Profile: Canada 367 27.9 Country Profile: Cayman Islands 384 27.10 Country Profile: China 396 27.11 Country Profile: Denmark 405 27.12 Country Profile: Finland 416 27.13 Country Profile: France 428 27.14 Country Profile: Germany 436 27.15 Country Profile: Guernsey 443 27.16 Country Profile: Hong Kong 458 27.17 Country Profile: India 473 27.18 Country Profile: Isle of Man 484 27.19 Country Profile: Japan 496 27.20 Country Profile: Jersey 503 27.21 Country Profile: Kenya 516 27.22 Country Profile: Liechtenstein 529 27.23 Country Profile: Malaysia 539 27.24 Country Profile: Mexico 552 27.25 Country Profile: Monaco 563 27.26 Country Profile: Morocco 575 27.27 Country Profile: Nigeria 584 27.28 Country Profile: Poland 593 27.29 Country Profile: Russia 604 27.30 Country Profile: Singapore 615 27.31 Country Profile: South Africa 625 27.32 Country Profile: South Korea (“Republic of Korea”) 638 27.33 Country Profile: Switzerland 651 27.34 Country Profile: UAE 663 27.35 Country Profile: Ukraine 677 27.36 Country Profile: United States of America 687 27.37 Country Profile: Vietnam 700 Appendix: Transparency International 2013 Corruption Perceptions Index 713 Index 719

Read more less

Book SynopsisPraise for Money & Happiness Laura Rowley makes us all understand the money-happiness connection in our own lives so that we spend our time and our efforts wisely. She gets to the heart of why money can bring feelings of stress, joy, and freedom, and Rowley offers insight that every reader can use to make smarter decisions that will lead to living a rich life in every possible definition of the term. --Lucy Danziger, Editor in Chief, Self magazine This is a wry and companionable guide to getting your finances in better sync with your values, and who wouldn''t be enriched by that? --Melinda Henneberger, Contributing Editor, Newsweek Money and Happiness takes cold, hard, financial information and warms it up through the voice of your best friend. You''ll find out how to achieve your life dreams, and avoid money nightmares. The cost of this book may be the best investment you''ll ever make. --Kevin McKinley, CFP, author of Make YourTable of ContentsAcknowledgments. Introduction. 1. Wealth and Values. 2. Identifying Your Values: Family, Community, Personality. 3. What Do You Believe about Money? 4. How Money Relates to Your Happiness. 5. Managing Spending and Banishing Debt. 6. How to Save. 7. Get Your Retirement Plan in Gear. 8. Fear, Greed, and Money Mistakes. 9. Money Milestones. 10. The Final Word on Money, Values, and Happiness. Notes. Resources. Index.

Read more less

Book SynopsisPraise for Be Smart, Act Fast, Get Rich Charles Payne''s book is blunt, provocative, and right on the money. This book is a lot like Charles himself: insightful and to the point. If you have time to read only one book on how to make money . . . this is the book. --Dr. Bob Froehlich, Chairman, Investor Strategy Committee Deutsche Asset Management, and Vice Chairman, DWS Scudder Be Smart, Act Fast, Get Rich is a book for all investors from first-time stock buyers to seasoned investors. ''Be Smart'' suggests you understand the fundamentals of the company you are purchasing. ''Act Fast'' suggests that action must be taken if you are going to increase your wealth in the stock market. All too often we find interesting ideas to invest in but never have the confidence to act, only to watch the stock''s price rise while others reap the benefits. This book is an easy read, and a must-read for all investors. --Tom Dorsey, President, Dorsey Wright & AssociatesTable of ContentsForeword. Preface. Acknowledgments. About the Author. PART ONE. BE SMART. Chapter 1. Welcome to the World You Already Live In (The Stock Market). Chapter 2. Looking Under the Hood. Chapter 3. Taking Your Companies’ Temperature. Chapter 4. Avoiding the Captain Ahab Syndrome. PART TWO. TOOLS AND RULES. Chapter 5. Pretty as a Picture. Chapter 6. Turning Charts into Roadmaps. Chapter 7. Chasing Stocks. Chapter 8. The Level Playing Field. PART THREE. ACT AND GET RICH. Chapter 9. Watching the Tape and Market Manipulation. Chapter 10. Stay in the Game by Staying Informed. Chapter 11. Risk and Reward. Chapter 12. The Care and Feeding of Your Portfolio. Appendix A. Industries for Relative Evaluations. Index.

Read more less

Book SynopsisState-of-the-art techniques and tools needed to facilitate effective credit portfolio management and robust quantitative credit analysis Filled with in-depth insights and expert advice, Active Credit Portfolio Management in Practice serves as a comprehensive introduction to both the theory and real-world practice of credit portfolio management. The authors have written a text that is technical enough both in terms of background and implementation to cover what practitioners and researchers need for actually applying these types of risk management tools in large organizations but which at the same time, avoids technical proofs in favor of real applications. Throughout this book, readers will be introduced to the theoretical foundations of this discipline, and learn about structural, reduced-form, and econometric models successfully used in the market today. The book is full of hands-on examples and anecdotes. Theory is illustrated with practical application. The authors'' WebTable of ContentsForeword xi Preface xiii Acknowledgments xxvii Chapter 1 The Framework: Definitions and Concepts 1 What Is Credit? 2 Evolution of Credit Markets 7 Defining Risk 11 A Word about Regulation 13 What Are Credit Models Good For? 14 Active Credit Portfolio Management (ACPM) 16 Framework at 30,000 Feet 19 Building Blocks of Portfolio Risk 23 Using PDs in Practice 32 Value, Price, and Spread 34 Defining Default 38 Portfolio Performance Metrics 38 Data and Data Systems 42 Review Questions 43 Chapter 2 ACPM in Practice 45 Bank Valuation 50 Organizing Financial Institutions: Dividing into Two Business Lines 52 Emphasis on Credit Risk 57 Market Trends Supporting ACPM 59 Financial Instruments Used for Hedging and Managing Risk in a Credit Portfolio 60 Mark-to-Market and Transfer Pricing 63 Metrics for Managing a Credit Portfolio 68 Data and Models 72 Evaluating an ACPM Unit 75 Managing a Research Team 77 Conclusion 86 Review Questions 87 Exercises 87 Chapter 3 Structural Models 89 Structural Models in Context 91 A Basic Structural Model 95 Black-Scholes-Merton 100 Valuation 107 Modifying BSM 117 First Passage Time: Black-Cox 118 Practical Implementation: Vasicek-Kealhofer 124 Stochastic Interest Rates: Longstaff-Schwartz 145 Jump-Diffusion Models: Zhou 150 Endogenous Default Barrier (Taxes and Bankruptcy Costs): Leland-Toft 151 Corporate Transaction Analysis 156 Liquidity 159 Other Structural Approaches 161 Conclusion 171 Appendix 3A: Derivation of Black-Scholes-Merton Framework for Calculating Distance to Default (DD) 171 Appendix 3B: Derivation of Conversion of Physical Probability of Default (PD) to a Risk-Neutral Probability of Default (PD Q) 177 Review Questions 179 Exercises 179 Chapter 4 Econometric Models 183 Discrete-Choice Models 186 Early Discrete-Choice Models: Beaver (1966) and Altman (1968) 191 Hazard Rate (Duration) Models 196 Example of a Hazard-Rate Framework for Predicting Default: Shumway (2001) 204 Hazard Rates versus Discrete Choice 206 Practical Applications: Falkenstein et al. (2000) and Dwyer and Stein (2004) 207 Calibrating Econometric Models 215 Calibrating to PDs 216 Calibrating to Ratings 227 Interpreting the Relative Influence of Factors in Econometric Models 234 Data Issues 238 Taxonomy of Data Woes 241 Biased Samples Cannot Easily Be Fixed 244 Conclusion 249 Appendix 4A: Some Alternative Default Model Specifications 249 Review Questions 252 Exercises 252 Chapter 5 Loss Given Default 255 Road to Recovery: The Timeline of Default Resolution 258 Measures of LGD (Recovery) 260 The Relationship between Market Prices and Ultimate Recovery 265 Approaches to Modeling LGD: The LossCalc (2002, 2005) Approaches and Extensions 273 Conclusion 285 Review Questions 286 Exercises 286 Chapter 6 Reduced-Form Models 289 Reduced-Form Models in Context 291 Basic Intensity Models 296 A Brief Interlude to Discuss Valuation 310 Duffie, Singleton, Lando (DSL) Intensity Model 312 Credit Rating Transition Models 329 Default Probability Density Version of Intensity Models (Hull-White) 340 Generic Credit Curves 348 Conclusion 353 Appendix 6A: Kalman Filter 354 Appendix 6B: Sample Transition Matrices 357 Review Questions 358 Exercises 358 Chapter 7 PD Model Validation 361 The Basics: Parameter Robustness 367 Measures of Model Power 371 Measures of PD Levels and Calibration 379 Sample Size and Confidence Bounds 396 Assessing the Economic Value of More Powerful PD Models 418 Avoiding Overfitting: A Walk-Forward Approach to Model Testing 431 Conclusion 437 Appendix 7A: Type I and Type II Error: Converting CAP Plots into Contingency Tables 438 Appendix 7B: The Likelihood for the General Case of a Default Model 440 Appendix 7C: Tables of ROC ε and n max 441 Appendix 7D: Proof of the Relationship between NPV Terms and ROC Terms 441 Appendix 7E: Derivation of Minimum Sample Size Required to Test for Default Rate Accuracy in Uncorrelated Case 446 Appendix 7F: Tables for Lower Bounds of ε and N on Probabilities of Default 447 Review Questions 452 Exercises 452 Chapter 8 Portfolio Models 455 A Structural Model of Default Risk 460 Measurement of Portfolio Diversification 460 Portfolio Risk Assuming No Credit Migration 461 Structural Models of Default Correlation 465 Credit Migration 470 A Model of Value Correlation 475 Probability of Large Losses 481 Valuation 484 Return Calculations 488 Risk Calculations 491 Portfolio Loss Distribution 498 Capital 514 Economic Capital and Portfolio Management 519 Improving Portfolio Performance 521 Performance Metrics 526 Reduced-Form Models and Portfolio Modeling 530 Correlation in Intensity Models 531 Copulas 534 Frailty 536 Integrating Market and Credit Risk 541 Counterparty Risk in Credit Default Swaps (CDS) and Credit Portfolios 544 Conclusion 546 Review Questions 547 Exercises 548 Chapter 9 Building a Better Bank: A Case Study 551 Description 552 Current Organization 554 Transforming the Capital Allocation Process 556 Portfolio Analysis 558 Active Credit Portfolio Management (ACPM) 562 Data, Systems, and Metrics 563 ACPM and Transforming the Bank 566 Appendix: Figures 569 Exercises 574 References 575 About the Authors 589 Index 591

Read more less

Book SynopsisNow fully updated and at your fingertips the most practical, authoritative guide to implementing GAAP Get the answers you need to prepare financial statements and keep up to date on the latest FASB requirements. Now fully revised and updated, Wiley GAAP Policies and Procedures, Second Edition is an ideal companion to the Wiley GAAP guide and provides the practical application information essential to ensuring that a company''s accounting systems are fully capable of incorporating the most recent GAAP. A concise version of the more detailed GAAP found in the Wiley GAAP guides, Wiley GAAP Policies and Procedures, Second Edition features handy, illustrative decision trees showing how to determine which GAAP ruling to use in a variety of situations, eliminating hours of time wading through detailed GAAP rulings and presents: * New chapters on interim reporting, segment reporting, and accounting changes and correction of errors * Updated content on FAS No. 151, Inventory Costs, Table of Contents1 Researching GAAP Implementation Problems 1 2 Cash, Receivables, and Prepaid Expenses 9 3 Short-Term Investments and Financial Instruments 37 4 Inventory 45 5 Revenue Recognition 85 6 Long-Lived Assets 137 7 Investments 179 8 Business Combinations and Consolidated Financial Statements 211 9 Current Liabilities and Contingencies 229 10 Long-Term Debt 255 11 Leases 289 12 Pensions and Other Postretirement Benefits 315 13 Stockholders’ Equity 323 14 Interim Reporting 369 15 Segment Reporting 375 16 Foreign Currency 383 Index 397

Read more less

Book SynopsisMillions of people are carrying too much debt, and feeling the pinch. Managing Debt For Dummies presents simple, practical, and effective methods for managing debt and its impact on personal finances.Table of ContentsIntroduction. Part I: Getting a Grip on Your Finances. Chapter 1: The Basics of Managing Too Much Debt. Chapter 2: Facing Financial Facts. Chapter 3: Adopting an Attitude for Success. Part II: Going on a Debt Diet. Chapter 4: Building a Budget. Chapter 5: Slashing Your Spending and Making More Money. Chapter 6: Negotiating with Your Creditors. Chapter 7: Consolidating Your Debts. Chapter 8: Using Credit Counseling to Get a Grip on Your Finances. Chapter 9: Dealing with Debt Collectors. Part III: Tackling Your High-Stake Debts. Chapter 10: Managing Your Past-Due Mortgage. Chapter 11: Keeping Your Wheels on the Road. Chapter 12: Avoiding an Eviction and the Loss of Your Utilities. Chapter 13: Handling Medical Bills and Child Support Obligations. Chapter 14: Catching Up on Your Federal Taxes. Chapter 15: Taking Responsibility for Your Federal Student Loan. Part IV: Avoiding Debt Problems down the Road. Chapter 16: Getting Good Credit Back. Chapter 17: Life after Too Much Debt: Staying on Track. Part V: The Part of Tens. Chapter 18: Ten Great Resources for Dealing with Debt. Chapter 19: Ten Debt Don’ts. Index.

Read more less

Book SynopsisPraise for Pension Revolution When Keith Ambachtsheer puts his keen mind to work on a problem, watch out! Here he exposes today''s fragile arrangements for the most serious social dilemma of our times--financing retirement. Then he provides a compelling and powerful set of solutions. His writings are essential reading for all who care about the future of American living standards. --Peter Bernstein, founder and President, Peter L. Bernstein, Inc., and author of Capital Ideas and Against the Gods This book describes one of the most ingenious inventions in the history of mankind: pension funds offering credible promises about old-age income. It reads like a thriller: how can well-governed pension funds be created in an imperfect world in which mortals wrestle with foibles and moral shortcomings? One of the world''s leading experts on pensions searches for the answer--and finds it. --Lans Bovenberg, Scientific Director, Network for Studies on PensionsTrade Review“I enjoyed reading the book…Well documented, the author makes it clear that it is time to change our thinking about asset management.” (Investment & Pensions Europe, April 2007) “This book is a valuable tool in raising awareness of the current climate and provides people with the information they need to create efficient pension solutions in the future." (Pensions World, May 2007) Table of ContentsPreface: Peter Drucker’s Pension Revolution: Here at Last xxiii Introduction: Why a Pension Revolution Now? xxvii The Trouble with DB Plans xxvii DC Plans Are Not the Answer Either xxviii Expert Pension Co-ops xxix TOPS Tipping Points xxx PART ONE The Pension Revolution: Touchstones CHAPTER 1 Are Pension Funds ‘‘Irrelevant’’? 3 An ‘‘Unreasonable’’ Actuary? 3 Exley’s Four Irrelevance Propositions 4 So What Is Relevant? 4 Responding to Exley 6 Relevant Pension Funds: Building the Case 6 Managing Retirement Income Risks 7 Leveling the Informational Playing Field 7 Getting the Execution of the Idea Right 8 CHAPTER 2 The Pension Revolution—Are You a Believer Yet? 9 A Revolutionary Reordering of the Pensions Firmament 10 From Fuzzy Pension Deals to ‘‘Risk-Sharing Co-ops’’ 10 Toward Pension ‘‘Business Models’’ That Work: The Risk Issue 11 Toward Pension ‘‘Business Models’’ That Work: The Scale Issue 12 The Pension Governance Issue 13 COPYRIGHTED MATERIAL Two Role Models 14 PGGM 14 SunSuper 15 Great Treasures? 15 CHAPTER 3 After the Perfect Pension Storm: What Now? 16 From Vegas to Oxford: In Search of Answers 16 Do Nothing or Something? 17 The Corporate Context: Two Basic Choices 18 New DC Plan ‘‘Business Model’’ Also Needed 19 The Industry/Public-Sector Pension Context 19 The ‘‘Fair Value’’ Question 20 Better Public Pensions Policy 21 CHAPTER 4 Beyond Portfolio Theory: The Next Frontier 22 Investment Theory’s Next Frontier: The Academic View 22 Investment Theory’s Next Frontier: Two Further Considerations 24 The Next Frontier: ‘‘Integrative Investment Theory’’ 25 CHAPTER 5 The United Airlines Case: Tipping Point for U.S. Pension System? 29 The United Airlines Case 29 A Good Question and Two Very Different Answers 30 ERISA’s ‘‘Sole Interest’’ Rule 31 Lessons from Abroad 32 Searching for ‘‘Supreme’’ Answers 33 The UAL Case in Context 34 CHAPTER 6 Peter Drucker’s Pension Revolution After 30 Years: Not Over Yet 36 Two Unfashionable Themes 36 Politico-Agency Issues 37 Pension Contract and Risk Issues 39 Investment Beliefs 40 Pension Fund Governance 40 Still Much Work to Do 41 CHAPTER 7 Winning the Pension Revolution: Why the Dutch Are Leading the Way 42 The Globe’s Number One Pensions Country 42 Culture, Compactness, and Leadership 44 Regulatory Leadership 45 Research Leadership 46 A Remaining Challenge: Solving the Organization Design Puzzle 46 What About the Other Pensions Countries? 47 CHAPTER 8 Pension Reform: Evolution or Revolution? 48 A Pension ‘‘Tipping Point’’ Indeed 48 What Should Happen? 49 Pension Reform in the United States 50 Pension Reform Elsewhere 51 Pension Reform: Evolution or Revolution? 52 PART TWO Building Better Pension Plans CHAPTER 9 Can Game Theory Help Build Better Pension Plans? 57 Pension Games 57 Why do Pension Game Switches Occur? 58 Who Are the Stakeholders and What do They Want? 59 Sources of Risk in Pension Schemes 60 Mitigating Micro Risks 60 Can We Mitigate Macro Risks? 61 Is Investment Risk Worth Taking in DB Plans? 61 Can Game Theory Build Better Pension Plans? 62 CHAPTER 10 If DB and DC Plans Are Not the Answers, What Are the Questions? 63 From Answers to Questions 63 Ultimate Pension Questions and Their Consequences 64 Underwriting Pension Mismatch Risk: Any Volunteers? 64 Should Pension Mismatch Risk Be Minimized? 66 Pension-Delivery Institutions 67 Benchmarking Traditional DB and DC Plans 67 The Way Ahead 68 CHAPTER 11 Human Foibles and Agency Dysfunction: Building Pension Plans for the Real World 69 Some Fundamental Questions First 69 Back to First Principles 70 Human Foibles 71 Agency Issues 72 Counteracting Human Foibles 73 Minimizing Agency Costs 74 TOPS, Employers, and Public Policy 75 TOPS and DB Plans 77 CHAPTER 12 DB Plans and Bad Science 78 Science and the Design of Pension Contracts 78 The TOPS Contract 78 Taking on Investment Risk: Implications 79 Is Investment Regime Risk Insurable? 80 Intergenerational Bargaining 81 Robust Course-Correction Mechanisms Required 82 The Flawed DB Model 82 Bad Science 83 CHAPTER 13 Peter Drucker’s Pension Legacy: A Vision of What Could Be 84 Two Handshakes to Remember 84 The Melbourne Message 85 TOPS: Neither DC nor DB 86 TOPS and Investing 87 TOPS and Governance 87 TOPS and the Real World 88 The Drucker Visit 89 PART THREE Pension Fund Governance CHAPTER 14 Reinventing Pension Fund Management: Easier Said than Done 93 A Paradigm Shift? 93 Novelties of Fact 94 Novelties of Theory 94 Pension Industry Responses 96 Crossing the ‘‘Innovation Chasm’’ 97 CHAPTER 15 Should (Could) You Manage Your Fund Like Harvard or Ontario Teachers’? 99 Four Things in Common 99 Legal Foundations: Solid or Not? 100 Governance and Management: Understanding the Difference 101 Investment Beliefs: Theirs or Yours? 102 Investment Processes: Like Wall Street? 103 Should You Manage Like HMC or OTPP? 104 Could You Manage Like HMC or OTPP? 104 CHAPTER 16 ‘‘Beauty Contest’’ Investing: Not Dead Yet 106 ‘‘D´ej `a Vu All Over Again’’ 106 Why ‘‘Beauty Contest Investing’’ Is Ugly 108 Integrative Investment Theory 108 Investment Beliefs 109 Managing from the Inside Out 110 CHAPTER 17 Eradicating ‘‘Beauty Contest’’ Investing: What It Will Take 112 The Ugliness of ‘‘Beauty Contest’’ Investing 112 A Two-Pronged Eradication Strategy 113 What Corporations Must Do 114 What Investing Institutions Must Do 114 A Debilitating Pension Fund Governance Problem 115 Light at the End of the ‘‘Beauty Contest’’ Tunnel? 117 CHAPTER 18 High-Performance Cultures: Impossible Dream for Pension Funds? 118 Thinking and Acting Like Goldman Sachs 118 New Research Results 119 Specific Governance and Management Challenges 121 In Conclusion 122 CHAPTER 19 How Much Is Good Governance Worth? 124 Governance Quality and Organization Performance Should Be Related 124 A Road Map for the Journey of Discovery 125 The Pension CEO Score and NVA Metrics: The Data 126 Pension CEO Scores Meet NVA Metrics 127 Further Insights 128 The Value of Good Governance 129 PART FOUR Investment Beliefs CHAPTER 20 The 10 Percent Equity Return Illusion: Possible Consequences 133 Consequential Miscalculations 133 Why 10 Percent Doesn’t Work 134 Painted into an Awkward Corner? 136 Consequences 137 CHAPTER 21 Stocks for the Long Run? . . . or Not? 139 A Debate with Jeremy Siegel 139 How Investment Theory Became Investment Practice 140 What Is Wrong with These ‘‘Proofs’’ 141 What if ‘‘Reality’’ Is Not a Random Walk? 141 Investment Regimes, Dividend Yields, and ERPs 143 The Post-Bubble Blues Decade 143 CHAPTER 22 ‘‘Persistent Investment Regimes’’ or ‘‘Random Walk’’? Even Shakespeare Knew the Answer 145 The Ambachtsheer-Siegel Debate Revisited 145 History on Our Side 146 The Investment Returns Story: How to Tell It 147 The ‘‘Investment Regime’’ Game: Spot Today’s Well Before It’s Over, and Tomorrow’s Before It’s Gone on Too Long 148 ‘‘Regime Spotting’’ versus ‘‘Random Walk’’: Which Is More Useful? 149 Contents xv Theory on Our Side, Too 150 Fellow Travelers 150 CHAPTER 23 The Fuss about Policy Portfolios: Adrift in Institutional Wonderland 151 Tempest in a Teapot . . . or Not? 151 Duality in Finance: A Brief History 152 Financial Duality in Pension and Endowment Funds: Building the Conceptual Framework 153 New Insights from the CEM Database 154 Enter Organizational Dysfunction 155 Decisions by Default 156 CHAPTER 24 Shifting the Investment Paradigm: A Progress Report 157 The ‘‘Policy Portfolio’’ Debate Continues 157 A Lens to See the World 158 Why the ‘‘Old’’ Lens Distorts 158 A Varying Equity Risk Premium 159 A New Lens 160 A Higher Level of Thinking 161 Glimmers of Light 163 CHAPTER 25 Whose ‘‘Investment Beliefs’’ Do You Believe? 164 Writing an ‘‘Investment Beliefs’’ Statement 164 Inferring Beliefs from Actions 165 Measuring Predictive Ability 166 What about Market Timing and Strategic Asset Allocation? 167 Expected ERP Powerful Predictor 167 Enter Woody Brock 168 In Conclusion 169 CHAPTER 26 Our 60-40 Asset Mix Policy Advice in 1987: Wise or Foolish? 171 Why Roll the Clock Back 20 Years? 171 Leibowitz’s Immunization Campaign 172 Investment Beliefs in 1987 173 Investment Beliefs in 1997 173 The Right Kind of Active Management 174 Wise or Foolish? 175 CHAPTER 27 ‘‘But What Does the Turtle Rest On?’’ A Further Exploration of Investment Beliefs 177 ‘‘But What Does the Turtle Rest On?’’ 177 The Efficient Markets Hypothesis: Fact or Fiction? 178 The Three Strikes against the EMH 179 Economists and ‘‘Operationally Meaningful Theorems’’ 180 The Adaptive Markets Hypothesis 180 The AMH’s Five Practical Implications 182 The AMH and Integrative Investment Theory 182 CHAPTER 28 Professor Malkiel and the New Investment Paradigm: Raining on the Parade? 184 Raining on the ‘‘New Paradigm’’ Parade? 184 The Bases for Malkiel’s Skepticism 185 An Alternative Conclusion 186 Winning Evidence 187 The ‘‘Good Governance’’ Boost 188 We’re Both Right 189 CHAPTER 29 The ‘‘Post-Bubble Blues Decade’’: A Progress Report 190 Another Nail in the IID Coffin 190 Why Non-IID Logic Wins 191 Investment Regimes in the Real World 192 What Seems to Actually Be Happening? 193 Some Actual Numbers 194 The Bottom Line 195 PART FIVE Risk in Pension Plans CHAPTER 30 Rethinking Funding Policy and Regulation: How Should Pension Plans Be Financed? 199 The Devil in the Details 199 How Many Course-Correction Tools? 200 Making Financing Decisions: In Whose Interest? 201 An Analytical Framework for Assessing DB Plan Financing Decisions 202 ‘‘Rational’’ Explanations 203 Four Principles to Fund By 204 CHAPTER 31 Funding Policy and Investment Policy: How Should They Be Integrated in DB Pension Plans? 206 Principles to Fund and Invest By 206 What Makes DB Pension ‘‘Contracts’’ Risky? 208 Should DB Funding Target Calculations Assume That More Risk Means More Return? 208 Is Current ‘‘Accepted Actuarial Practice’’ Unacceptable? 209 What Is an ‘‘Acceptable Level of Certainty’’? 210 Surplus Ownership 211 Cleaning Up Our Act 212 CHAPTER 32 Resurrecting Ranva: Adjusting Investment Returns for Risk 213 Resurrecting RANVA 213 RANVA in 1998 214 Measuring RANVA in the Real World 215 The 2000 to 2004 Experience: Lessons 216 Remaining Barriers 217 CHAPTER 33 Adjusting Investment Returns for Risk: What’s the Best Way? 219 Resurrecting RANVA 219 The ‘‘Cost of Market Volatility’’ Approach 220 The ‘‘Cost of Insurance’’ Approach with Risk Buffers 222 The ‘‘Cost of Insurance’’ Approach with Put Options 223 PART SIX Measuring Results CHAPTER 34 Pension Plan Organizations: Measuring ‘‘Competitiveness’’ 227 Pension Plan Organizations and ‘‘Legitimacy’’ 227 ‘‘Provider of Choice’’ for Which Services? 228 Benchmarking Pension Services 229 Costing the Benefit Administration ‘‘Business’’ 229 The Benefit Administration Cost Equation 231 Build or Buy? 232 CHAPTER 35 Measuring DC Plans as ‘‘Value Propositions’’: The New Imperative for Plan Sponsors 233 Silk Purses from Sows’ Ears 233 Measures of ‘‘Prudence’’ 234 The ‘‘Own-Company Stock’’ Phenomenon 234 Understanding DC Plan Total Returns 235 DC versus DB Plan Cost Performance 237 Other DC Plan Performance Metrics 239 ‘‘Value Proposition’’: Yes or No? 239 CHAPTER 36 Measuring Pension Fund Behavior (1992 to 2004): What Can We Learn? 240 A Well-Endowed Database 240 Current International Investment Policy and Implementation Style Differences 241 Ten-Year Investment Policy and Implementation Style Trends for U.S. Funds 242 Did Active Management Add Value? 243 The Selection ‘‘Alphas’’: Good News and Bad News 244 Is There Also a Payoff from Actively Managing Pension Fund Costs? 247 Two Important Lessons Learned Thus Far 249 PART SEVEN Pensions, Politics, and the Investment Industry CHAPTER 37 Whither Security Analysis? 253 Bubble, Bubble, Toil and Trouble 253 Fortune Trashes Wall Street 254 Is Better Regulation the Answer? 255 Reversing the Financial Food Chain 256 What Is Security Analysis, Anyway? 257 Even Good Security Analysis Needs Context 257 Effective ‘‘Buy-Side’’ Structures 258 In Conclusion 259 CHAPTER 38 Pension Funds and Investment Firms: Redefining the Relationship 260 Who Are the Simbas of the Pension Investment Kingdom? 260 The Money Flood 261 A Question of Governance 261 Enter the Anthropologists 262 A Call to ‘‘Excellence’’ 263 What Do ‘‘Excellent’’ Pension Funds Look Like? 264 A Supplier-Driven Market 265 The Tiny Equity Risk Premium Factor 265 ‘‘New Paradigm’’ Pension Funds: What Kind of Investment Services Do They Want? 267 New Pension Fund–Investment Firm Partnerships 270 Could You Be a ‘‘New Paradigm’’ Player? 271 CHAPTER 39 The New Pension Fund Management Paradigm: Feedback from Financial Analysts 272 Test Driving the New Paradigm 272 Pension Politics and Economics 273 Pension Plan Governance 276 The New Pension Fund Management Paradigm 277 Putting the Paradigm in Practice 278 Performance Measurement 281 Did the Yardsticks Move Forward or Backward? 282 CHAPTER 40 Reconnecting GAAP and Common Sense: The Cases of Stock Options and Pensions 283 Closing the Information GAAP 283 When Are Employee Stock Options ‘‘Expenses’’? 284 The Common-Sense Solution in Action 285 Current Pension Accounting Rules Defy Common Sense, Too 285 Sensible Pension Accounting Rules 287 Common Sense in Action 288 Carpe Diem 289 CHAPTER 41 Is Sri Bunk? 290 SRI and Zen 290 What Is ‘‘Socially Responsible Investing’’? 290 A Slippery Slope? 291 Sustainable Investing 292 Assessing the Sustainability of Dividend Growth 293 From Saying to Doing: A Case Study 294 Redefining the SRI Revolution 294 CHAPTER 42 Alpha, Beta, Bafflegab: Investment Theory as Marketing Strategy 296 Giving Alpha and Beta a Rest 296 The Beautiful Art of Language 297 The Myth of ‘‘Absolute-Return Investing’’ 298 Investment Theory with the End in Mind 298 The Critical Role of Fund Governance 299 Pension Revolution 300 CHAPTER 43 The Turner Pensions Commission Report: A Blueprint for Global Pension Reform 302 Pension Wisdom from the United Kingdom 302 Turner’s Recommendations 303 The Power of Integrative Thinking 303 Blueprint for Global Pension Reform 304 NPSS Governance, Management, and Investment Options 307 Moving Forward 308 CHAPTER 44 More Pension Wisdom from Europe: The Geneva Report on Pension Reform 309 Eight Hands, Four Economists, and One Point of View 309 Powerful Pension Policy Implications 310 Labor Markets and Human Capital 311 Optimal Risk Sharing 312 Optimal Pension Fund Organizations 313 A Powerful Pension Vision 314 PART EIGHT The Case of PERS CHAPTER 45 PERS and the Pension Revolution: Active Participant . . . or Passive Bystander? 317 Alyson Green’s New Job 317 History of Workplace Pensions 319 The 1976 to 2005 Period 319 Governance–Organizational Issues at PERS 320 Finance–Investment Beliefs 321 Pension Contract–Risk Issues at PERS 321 Is a Higher Contribution Rate the Answer? 323 More Drastic Action Indicated 324 Spreading the Pain Evenly 326 Is Risk-Sharing an Essential Pension Plan Feature? 327 Getting from Here to There 329 Devising an Action Plan 329 CHAPTER 46 Advice for Alyson Green: How PERS Can Join the Pension Revolution 331 Case Discussion Summary from October 25, 2005 331 The PERS Situation 332 The PERS Debate 332 In Conclusion: A Call to Arms 335

Read more less

Book SynopsisGet this handy roadmap to making money in the commodities market. Getting Started in Commodities shows you how to successfully invest in the commodities market in futures, stocks, stock indices, and options.Table of ContentsForeword. Acknowledgments. About the Author. Chapter 1. What is a Commodity? Chapter 2. How the Commodity Markets Work. Chapter 3. Commodity Trading in the Stock Market. Chapter 4. Commodity Trading in the Index Markets. Chapter 5. Fundamental Analysis of the Commodity Markets. Chapter 6. Technical Analysis of the Commodity Markets. Chapter 7. Elliott Wave Trading for Commodities. Chapter 8. Options Trading in the Commodity Markets. Chapter 9. Money Management: Staying in the Game. Chapter 10. Psychology 101: Winning the Mind Game. Chapter 11. Trading Commodity-Related Growth Stocks. Chapter 12. Seasonal Commodity Patterns. Chapter 13. Brokers and the Online Revolution. Chapter 14. Putting It All Together. Appendix. Glossary. Index.

Read more less

Book SynopsisAt a time when many organizations are cutting their internal auditing departments, it''s imperative that every manager understands the fundamentals of internal audits. This book is designed as a corporate resource to help managers and their teams set standards for self-auditing, risk management, compliance review, and formal disclosure reporting. Readers will learn proven, effective techniques for performing reliable and defensible audit reviews to ensure compliance with regulations and standards.Table of ContentsAbbreviations. 1. Why auditing? Introduction. Why auditing? External auditing. Internal auditing. Compliance auditing. Fundamental components. Common mistakes. Check your progress. Newsflash – read all about it. The key messages. 2. The wider governance context. Introduction. The accountability dilemma. Corporate governance. The ethical platform. The risk management concept: roles and responsibilities. Internal controls. Common mistakes. Check your progress. Newsflash – read all about it. The key messages. 3. Basic risk concepts. Introduction. The risk model. Risk identification. Risk assessment. Risk mitigation. Risk appetites. Common mistakes. Check your progress. Newsflash – read all about it. The key messages. 4. Different audit approaches. Introduction. Different strokes. The past. The present. The future. Making choices. Common mistakes. Check your progress. Newsflash – read all about it. The key messages. 5. The manager’s initial audit. Introduction. Leading with risk. Overall strategy. Planning. Field work. Reports and the risk register. Common mistakes. Check your progress. Newsflash – read all about it. The key messages. 6. The team’s initial audit. Introduction. The team initial audit concept. Establishing the programme. Running workshops. A short example. Getting the best out of people. Common mistakes. Check your progress. Newsflash – read all about it. The key messages. 7. The manager’s initial investigation. Introduction. What is at stake. Reputation management. Types of investigations. Finding out. Making sense and making good. Common mistakes. Check your progress. Newsflash – read all about it. The key messages. 8. Successful risk management. Introduction. Building on the risk concepts. The risk policy. Links to control. Driving and leading. Tuning into enterprise risk management. Common mistakes. Check your progress. Newsflash – read all about it. The key messages. 9. Achieving the cultural shift. Introduction. Starting from zero. Why culture changes. Change and the systems perspectives. Creative work teams. The ultimate in risk management: auditing for all. Common mistakes. Check your progress. Newsflash – read all about it. The key messages. 10. Reporting results. Introduction. Public disclosures. Professionalism and credibility. Evidential base. Using the risk register. Good reporting. Common mistakes. Check your progress. Newsflash – read all about it. The key messages. 11. So, why auditing? Introduction. Why auditing? External auditing. Internal auditing. Compliance auditing. Fundamental components. Common mistakes. Check your perceptions. Newsflash – read all about it. The key messages. A final word. Appendix A: Manager’s initial audits standards and guidance. Appendix B: Team initial audits standards and guidance. Appendix C: Manager’s initial investigations standards and guidance. Appendix D: Checking your progress – your score. Appendix E: Staff surveys. Index.

Read more less

Book SynopsisIt is not uncommon to meet professionals in financial services who have only a vague idea of what their colleagues actually do. The root cause is specialization and the subsequent development of jargon that makes communication between common specialists faster and more precise but is virtually impenetrable to everybody else.Trade Review“To understand the industry, here is help…” (The Hindu Business Line, 16th September 2004)Table of ContentsForeword. Acknowledgements. Prologue. PART I: FINANCIAL SYSTEMS. 1. Securities Markets and Financial Intermediation. 2. Introduction to Securities Valuations. 3. Central Banks and the Creation of Money. PART II: THE SPREAD BUSINESS. 4. Deposit Taking and Other Funding. 5. Corporate Lending. 6. Operational Services. 7. Mortgage Lending. 8. Credit Cards and Other Retail Loans. Part III: RISK MANAGEMENT. 9. The Controls Cycle. 10. Managing Interest Rate and FX Risk. 11. Trading. 12. Managing Market Risk. 13. Managing Credit Risk. 14. Capital Management. Part IV: CAPITAL MARKETS. 15. Fund Management. 16. Investment Banking. 17. Securitization. PART V: BANK VALUATIONS AND ACQUISITIONS. 18. Bank Valuations. 19. Bank Acquisitions. PART VI: PROBLEM LOANS AND BANKING CRISES. 20. Corporate Failures and Problem Loans. 21. Banking Crises. 22. Dealing with & Valuing Insolvent Banks. PART VII: SUPERVISION & FINANCIAL STATEMENTS. 23. Regulation, Supervision and Policing. 24. The Balance Sheet. 25. The Income Statement. PRIMERS. Statistics for Finance. Derivation of Duration and Convexity. Financial Institutions. Appendix I: The Basel Accord. Appendix II: Glossary of Terms. Sources and Further Reading. Index.

Read more less

Book SynopsisThis book provides an introduction to the political, regulatory, technology, process and people aspects of compliance.Trade Review"Its analysis of a variety of practices in corporate governance and its fruitful guidance of governance and compliance in diverse industries make this a must-own reference. It is not easy to find a handbook of corporate governance that provides such scope in a single volume. This handbook should be one of the most frequently referenced books in your bookshelf, if you work in the field of corporate governance." (Journal of International Accounting, 2008)Table of ContentsPreface. Acknowledgement. About the Contributors. Chapter 1. Introduction (By Dr. Anthony Tarantino). Part One. Corporate Governance. Chapter 2. A Risk-Based Approach to Assess Internal Control over Financial Reporting ("ICFR") (By Tim J. Leech and Jeffrey C. Thomson). Chapter 3. Coso ― Is "It" Fit For Purpose (By Tim J. Leech)? Chapter 4. Time to Rethink the Corporate Tax (By Ann Cullen). Chapter 5. The Role of Internal Audit (By Frank Edelblut and Dr. Hernan Murdock). Chapter 6. Outsourced Processes: Risk and Resolution (By Mark Stebelton). Chapter 7. The Last Mile of Finance (By Eric Keller). Chapter 8. US Stock Option Backdating Scandals (By Dr. Anthony Tarantino). Chapter 9. Fraud and Corruption (By Dr. Hrishikesh Vinod). Chapter 10. Why Fighting Corruption Remains A Loosing Battle (By Anwar Shah)? Part Two. It Governance. Chapter 11. IT Governance Overview (By Alan Calder). Chapter 12. ISO 27001 and ISO 17799 (By Alan Calder). Chapter 13. CobiT (By Richard Marti). Part Three. Operational Risk. Chapter 14. Operational Risk Management (ORM) Best Practices (By Dr. Anthony Tarantino). Chapter 15. The Use of Six Sigma in Operational Risk and Regulatory Compliance; Reduction in Variability (By Dr. Brett Trusko). Chapter 16. Operational Risk Management Using Quantitative Methods (By Koti Ancha and Dr. Deborah Cernausksas). Chapter 17. Operational Risk Management in Financial Services (By Dr. Anthony Tarantino). Part Four. Technology And Tools. Chapter 18. What to Look for in Enterprise Content Management for Compliance (By Julia Koo). Chapter 19. Enterprise Search and Automated Testing (By Scott McElhaney and Saker Ghani). Chapter 20. What to Look For in Audit Operations Applications (By Julia Koo) Chapter 21. Automation of Segregation of Duties (By Lindsey Kudo). Chapter 22. Internal Controls Best Practices (By Ian Rodgers). Chapter 23. IT Controls Automation and Database Management: Defending Against the Insider Threat (By Harald Collet). Chapter 24. PLM Technologies: Role and Value in Supporting Product Compliance (By Richard Kubin). Chapter 25. How XBRL Will Dramatically Improve: Reporting and Control Processes (By Liv Watson, Robert Eccles, and Mike Willis). Part Five. Environmental Governance. Chapter 26. The Impact of Environmental Legislation on High Tech Supply Chains (By Thomas Garson and Krishna Gorrepati). Chapter 27. Environmental Compliance and Enforcement in China (By Dr. Wanxin Li and Krzysztof Michalak). Chapter 28. The Trajectory of Environmental Regulation: A Strategic Approach for Industry (By Michael Kirschner). Chapter 29. Environmental Compliance in India (By Prof. Aparna Sawhney). Chapter 30. Latin American Environmental Compliance: Environmental Biotechnology (By Oneglia Cavalcanti, Dr. Helen de Aguiar Lima, Luiz Lima, and Luiz Gluck Lima). Chapter 31. Policy Developments in the United States Related to Chemicals and Electronic Waste (By Mike Wilson and Michael Kirschner). Part Six. Industry Governance. Chapter 32. Global Homologation: Removing Regulatory Barriers to Trade (By Daniel P. Lawless and Shirley Cui Tarantino). Chapter 33. Protecting the Innocent: The Information Security and Privacy Battle (By Lane Leskela). Chapter 34. Compliance in Freight Transportation and Logistics (By David Jacoby). Chapter 35. Pharmaceutical (By James G. Robertson). Chapter 36. Public Sector Transparency – How is it regulated in Europe (By Massimiliano Claps)? Chapter 37. Retail (By Ivano Ortis). Chapter 38. Supply Chain Compliance (By Michael F. Cox). Chapter 39. Telecommunications (By Angela Fitts). Chapter 40. Compliance in Freight Transportation and Logistics (By David Jacoby). Part Seven. Financial Services Governance. Chapter 41. Financial Services Regulation and Corporate Governance (By Dennis Cox). Chapter 42. Insurance Industry and Solvency II (By Dr. Anthony Tarantino). Chapter 43. Islamic Finance (By Sabah Mahmoud). Part Eight. Regional And National Guidance. Chapter 44. Corporate Governance and Risk Management in Africa (Dr. Jackie Young). Chapter 45. European Union – Regional Guidance (By Michael Mainelli). Chapter 46. Corporate Governance in Major Islamic Nations (By Dr. Anthony Tarantino). Chapter 47. Global Compliance Programs in Latin America: Major Challenges and Lessons Learned (By Pedro Fabiano). Chapter 48. Southeast Asia Corporate Governance (By Dr. Lawrence Wasserman). Chapter 49. Australian Corporate Governance: The ASX Principles (By Dr. Anthony Tarantino). Chapter 50. Corporate Governance: Indonesia (By Dr. Lawrence Wasserman). Chapter 51. Compliance: Brazil (By Prof. L. Nelson Carvalho, Prof. Elionor Weffort, and Prof. Bruno Salotti). Chapter 52. Canadian SOX (Bill 198) (By Madeleine Ferris Shaw and Sanjay Anand). Chapter 53. Corporate Governance: China (By Dr. Anthony Tarantino). Chapter 54. Corporate Governance: France (By Dr. Anthony Tarantino). Chapter 55. Global Compliance: Germany (By Georg Stadtmann and Markus F. Wissmann). Chapter 56. The Current and Future States of Corporate Governance Culture and Regulation in India (By Sanjay Anand). Chapter 57. Corporate Governance: Compliance versus Value Addition (By Sanjay Anand, Prof. C.V. Baxi, and Prof. C.L. Bansal). Chapter 58. Corporate Governance: An Overview On The Italian Case (By Marco Venturini and Francesca Bevilacqua). Chapter 59. The Guide to Global Compliance: The national chapter - Japan (By Yamamoto Kouji). Chapter 60. Compliance in Mexico: Trends, Best Practices and Challenges (By Pedro Fabiano). Chapter 61. Corporate Governance in Russia (By Dr. Anthony Tarantino). Chapter 62. Corporate Governance: South Korea (By Dr. Jill Solomon). Chapter 63. Corporate Governance: Spain (By Dr. Anthony Tarantino). Chapter 64. Corporate Governance: UK (By Dennis Cox). Chapter 65. United Kingdom's Combined Code (By Dr. Anthony Tarantino). Chapter 66. Corporate Governance: United States (By Dr. Anthony Tarantino). Chapter 67. Sarbanes-Oxley Act (By Sanjay Anand). URL. (17) Measuring the Effectiveness and Performance of Your Governance, Operational Risk, and Compliance Programs (By Scott L. Mitchell and Carole S. Switzer). (36) Accounting, Budgeting and Reporting - How is the Regulatory Framework Changing in Public Sector (By Massimiliano Claps)? (46) Introduction to region China's Banking Sector (By Dr. Anthony Tarantino). (47) The Key To Malaysian Financial Institutions Compliance and Economic Crime Requirements (By Tommy Seah). (48) Corporate Governance and Risk Management in the South African Banking Industry (By Dr. Jackie Young). (49) Men Behaving Badly in Banking: Revealing the Irrelevance of Best Practices in Corporate Governance (By Dr. Shann Turnbull). Index.

Read more less

Book SynopsisREALTOR(r) Magazine's most popular issue, issued each March, offers how-to lists, worksheets, and checklists on all of the most critical aspects of residential real estate sales: prospecting, selling, negotiating, and legal considerations.Table of ContentsForeword vii Introduction: Your Seminar-to-Go ix CHAPTER 1 Prospecting 1 Striking Real Estate Gold CHAPTER 2 Selling 47 Gain Clients for Life CHAPTER 3 Know Your Market 91 When You Keep a Pulse on What’s Happening, You Spot Important Changes CHAPTER 4 Stay Out of Trouble 109 No Joy in Getting Sued CHAPTER 5 Personal Growth 137 What Would Miss Manners Do? CHAPTER 6 Professional Development 165 The Well-Trained Shall Inherit the Business CHAPTER 7 Time Management 197 Don’t Sweat the Unimportant Stuff Additional Resources 215 About the NATIONAL ASSOCIATION OF REALTORS® 249 Index 253

Read more less

Book SynopsisWhile most books on trading deal with general concepts and shy away from specifics, Forex Patterns and Probabilities provides you with real-world strategies and a rare sense of clarity about the specific mechanics of currency trading.Table of ContentsPreface xv Acknowledgments xvii About the Author xix Part I The World’s Most Dynamic Trading Market 1 Chapter 1 Getting Started in Forex 3 From Stocks to Forex 4 Getting to Wall Street 4 Welcome to the Jungle 5 Football and Forex 5 Stock Market Headaches 6 Welcome to Forex 9 A New Beginning 10 Chapter 2 All About Forex 11 The Canadian Dollar and the U.S. Dollar 11 The Euro and the U.S. Dollar 12 Trading Terminology 13 An Easy Way to Understand the Exchange Rate 23 Chapter 3 Questions and Answers 25 Why Does the Big Money Trade Forex? 25 Why Is Forex Suddenly So Popular? 26 How Do Traders Make Money in the Forex Market? 26 Why Do Currencies Trade in Pairs? 27 How Can I Trade Two Currencies at One Time? 28 How Is 24-Hour-per-Day Trading Possible? 28 How Is the Trading Day Structured? 29 Greenwich Mean Time 30 Chapter 4 Technical Analysis and the Forex Market 33 The Theory behind Technical Analysis 33 Statistical Survey 34 Fear of the Unknown 34 Trading Patterns and Technical Indicators 35 The Psychology behind the Market 36 Moving Beyond Technical Analysis 38 Trends 39 Proper Order 39 Fibonacci Techniques 41 Chapter 5 Things You Need to Know Before Trading Forex 43 The “Triple Threat” Trader 43 Gaining Experience 44 Which Pair to Trade? 45 Commodity Currencies 46 Don’t Limit Yourself 47 Trading and Karma 49 Schadenfreude 50 Part II Trading Strategies for Trending Markets 51 Chapter 6 Understanding Trends and Tendencies 53 Trading Conditions 53 The Importance of Maintaining Objectivity 55 Begin with a Tendency 57 Putting the Trend to Work 59 Self-Fulfilling Prophecy 59 Take Me to the River 60 How to Determine If the Market is Trending 61 Chapter 7 The Anatomy of a Trend 63 Why Trends Form 63 Don’t Fight the Trend 66 Chapter 8 Forex Multiple Time Frame Strategy 69 Why Does It Work? 70 Combining Fibonacci and Trend 71 Overbought Does Not Equal “Sell” 73 Picking Tops and Bottoms 75 The Entry Signal 76 Placing the Stop 76 Getting Out 77 Welcome to the Real World 79 Tweaking the Exits 79 Executing the Plan 81 Second-Guessing 82 Bringing It Home 83 The Devil’s Advocate 83 When to Stay Out 84 Reloading the Trade 85 Fantasy versus Reality 87 Phantom Signal 89 Temporary Success and Failure 89 The Stop Run 91 Chapter 9 The FX-Ed Trend Technique 99 Trends Are Self-Sustaining 99 Difference of Opinion 100 Big Money at Work 100 The Common Denominator 100 Long or Short 101 Identifying the Trend 103 Filtering the Trend 104 The Catalyst 107 Placing the Stop 107 Volatility Stop 108 Comparing Apples to Apples 109 ATR Calculation 110 The Entry 110 The Stop 112 The Trade 112 Don’t Fish for Minnows 117 Back to the Trade 118 Denouement 120 The News versus the Trend 120 Appearances Can Be Deceiving 121 More Than One Chance 124 Partial Exit Exercise 125 Discretionary and Strategic Exits 126 Faulty Wiring 126 Partial Exit Technique 127 Reloading 128 Important Points to Consider 129 Final Thoughts 130 Part III Nontrending Trading Techniques 131 Chapter 10 The Ultimate Indicator 133 The Price Is the Key 133 Why Support Becomes Resistance 137 The Pleasure Principle and Trading 137 Price Action 139 Don’t Stand in Front of a Freight Train 140 Chapter 11 Keys to Intraday Breakouts 145 Ascending and Descending Triangles 145 Trend Filter 147 Time-of-Day Filter 148 Summary 152 Chapter 12 Flags and Pennants 153 Pennants 154 Flags 162 Filtering Entries 164 Summary 168 Chapter 13 The Squeeze Play 169 The Cycle of Volatility 169 Perception Moves the Market 170 Volatility Breakout Strategy 176 Chapter 14 The Round Trip 181 Why Round Numbers Capture Our Attention 181 Why Round Numbers Are Effective 182 Round Numbers and Forex 182 The First Bounce Is the Best Bounce 183 Using the Moving Average 184 The Strategy in Action 186 Chapter 15 The Interest Rate Edge 193 Think Like the Big Boys 193 Interest Rate Differentials 194 Here’s How It Works 194 Changing Differentials 195 What’s the Big Deal? 196 Collecting Interest 196 U.S. Dollar/Japanese Yen 197 Long-Term Play 198 Looking Ahead 199 Chapter 16 The Boomerang 201 Fading False Breakouts 201 The Strategy 202 Setting the Parameters 202 Entering the Trade 203 Simple but Effective 205 Part IV Take Control of Your Trading Destiny 207 Chapter 17 How to Achieve Spectacular Gains 209 Keep Your Eyes on the Road 210 Proper Goal Setting 210 Breaking Down Your Goals 212 Consistency Is the Key 213 What Happens When I Reach My Goal? 214 Chapter 18 The Forex Playing Field 215 Evening the Odds 215 The House Has the Edge 216 Make the Playing Field Bigger 216 But the Other Trading Instructor Said 217 Let’s Do the Math 217 Changing the Equation 218 Why Doesn’t Everyone Do It? 219 Huge Gains with Minimal Effort! 220 What We Can Learn from the “Smart Money” 221 Now Get Out There and Win 221 Chapter 19 Trading Lessons from Life 223 Panic at the Beach 223 The Endless Tournament 224 Summary 225 Chapter 20 What You Don’t Know Can Hurt You 227 Sarcasm Alert! 228 Know When to Retreat 228 The “95 Percent Winners Strategy” 229 Beware the Back Tester 230 Hypothetically Speaking 230 Chapter 21 A Tale of Two Traders 233 Individuals versus Institutions 233 The Difference Between Amateurs and Professionals 234 Chapter 22 Some Final Thoughts 237 A Good Trade Is Not the Same Thing as a Winning Trade 237 Proper Execution Is Critical 238 Take Responsibility for Your Actions 238 Keep It Simple 239 Physical versus Mental 239 In Closing 240 Glossary 241 Index 247

Read more less

Book SynopsisMortgage Rip-offs and Money Savers reveals how the mortgage industry cheats borrowers out of billions in extra costs every year. Mortgage industry insider Carolyn Warren taps her decade of experience with lenders to expose the tricks, lies, and dirty little secrets they don''t want you to know. With her expert guidance, borrowers will save tens of thousands when they avoid the traps so many consumers fall into. Having this inside information is the only way borrowers can truly get the best possible deal. This book presents that knowledge in an interesting and easy format that anyone can understand. Readers won''t be victims of the mortgage industry with this invaluable resource in hand. Instead, they''ll get the best possible rates, avoid bogus fees, and get the great deal they deserve.Table of ContentsACKNOWLEDGMENTS. INTRODUCTION. PART I : Eight-Step Guide to Getting the Best Rate and Protecting Yourself from Most Common Scams. CHAPTER 1 Step 1: Boost Your Credit Rating and Prequalify. What Credit Score Do You Need to Buy a Home? Additional Notes about How Lenders Rate Credit. What to Do if You Have Credit Challenges. People with Low Scores Get Ripped Off More Often. Find Out How Much You Qualify For. The Three-Step Preapproval Process. How Do Lenders Decide How Much Money to Lend You? Which Payments Count for Debt Ratio? Pick Your Own Budget. Coming Up. CHAPTER 2 Step 2: Create a Short List of Three Honest Mortgage Lenders. Tricks to Foil Your Shopping Efforts. Selling the Sizzle. Special Deals and Secret Loans. The Loan They Don’t Want You to Know About. The Sticky Trick. Creating Your Short List. Write Down Two Mortgage Companies and One Bank. Make One a Referral. Get a Specific Name. Using an Internet Lender. Big National Lenders versus Local Lenders. Listen to Your Instincts. Coming Up. CHAPTER 3 Step 3: Choose the Right Type of Loan for Your Situation. Types of Loans. 30-Year Fixed Rate. 15-Year Fixed Rate. 40-Year or 45-Year Fixed Rate. Adjustable Rate Mortgage (ARM). Balloon Loan. 2/28 and 3/27 “Fixed Rate” Adjustable Loans. Interest-Only Loans. Risky Loans. Loans That Should Be Illegal. Prepayment Penalties: Good and Bad. What Is a Prepayment Penalty and How Does It Work? Hard or Soft Prepayment Penalty? Good Prepayment Penalties. Biweekly Mortgage Savings: Bargain or Rip-Off ? How Does It Really Work? Coming Up. CHAPTER 4 Step 4: Request Three Good Faith Estimates and Compare the Costs. Bad Ideas. Shopping for the Best Interest Rate Is a Bad Idea. Comparing APR Is a Bad Idea. Comparing Ads Is a Bad Idea. How Should You Shop for a Mortgage? How to Ask for Your Good Faith Estimates. What if You Don’t Know Your Credit Score? How to Compare Good Faith Estimates. Getting a Guarantee. Finding an Honest Pro. The Key to a Good Borrowing Experience. Coming Up. CHAPTER 5 Step 5: Uncover the Best-Kept Secret of the Mortgage Industry. Stop Paying Too Much! Conversations They Don’t Want You to Hear. How Do Commissions Work? How Do Loan Officers’ Commissions Work? Who’s Getting Par Rate? There Should Be a Law. Deciding between Broker and Banker. Brokers Acting like Bankers. Why Does the Law Treat Brokers and Bankers Dif ferently? What’s a Fair Price to Pay for Your Loan? More on YSPs. What Should You Do if YSP Is a Big Secret? What if the YPS on Your Loan Goes Up? Coming Up. CHAPTER 6 Step 6: Negotiate Lower Fees and Rates. Categorizing Fees. Junk Fees: The Dirty Dozen. Questionable Fees. Legitimate Fees and Third-Party Costs. Coming Up. CHAPTER 7 Step 7: Decide Whether It Makes Sense to Pay Points, and Lock In Your Rate—Carefully. The Truth about Par Rate and Discount Points. Are You Protected with a Government Loan? When Does It Make Sense to Pay a Loan Discount? When It Might Make Sense to Buy Down Your Rate. Lock In Your Rate. What Is a Rate Lock and How Does It Work? When Can You Lock In Your Rate? What if Your Loan Doesn’t Close on Time? What if Rates Go Down after You Lock? Do Mortgage Brokers Have an Advantage over Bankers? Beware Rate Gambling! Losing on a Rate Lock Gamble. Insider’s Guide to Protecting Yourself from Rate Lock Scams. Coming Up. CHAPTER 8 Step 8: Avoid the Five Most Common Unpleasant Closing Surprises. Denial of Appraisal. Seven Reasons a Lender Might Reject Your Appraisal. Bait and Switch. Determining Whether You’ve Been Duped. Bait and Switch or Honest Mistake? Mistakes. Tricks at Signing. Surprise Prepayment Penalty. Insider’s Handy Checklist for Avoiding Nasty Surprises. Coming Up. PA RT I I. Tips for Homeowners Who Are Refinancing. CHAPTER 9 What You Must Know before You Refinance. How the Smooth-Talkers Work. Four Tricks Equity “Strippers” Use. Dangers of Refinancing Too Often. Three Savvy Refinancing Strategies. Two Savvy Refinancing Questions to Ask. Three Refinancing Alerts. Neophytes Posing and Managers (and Other Callers). Payment Reduction Notices and Other Offers to Save. Disputes over Your Home Value. Coming Up. CHAPTER 10 Watch Out if You’re Rolling Fees into Your Loan! The Scoop on Closing Costs. The Worst Refinance: Could It Be Yours? Pay Attention to the Numbers. Coming Up. PA RT I I I. Special Topics and Unique Situations. CHAPTER 11 Great Deals on below Market Rate Loans. First-Time Homebuyer Programs Open to Anyone. How to Qualify for a “First-Time” Loan. Loans for Public Servants. Inexpensive Loans for the Community-Minded. Loans for People with a Disability. Free Grants. Who Can Get a Grant? What Are the Grant Programs Called? Where Can You Get a Grant Program? How Do Grant Programs Work? The Controversy. Coming Up. CHAPTER 12 Tips for Loans on Condos and Two- to Four-Family Homes. How to Get a More Reasonably Priced Home. Buying a Condo. Investing in a Duplex, Triplex, or Fourplex: The Two- to Four-Family Home. Financing an Investment Property. Coming Up. CHAPTER 13 What if You Get Turned Down? Turning a Denied Loan into an Approved Loan. The Secret to Writing an Effective Letter of Explanation. Coming Up. CHAPTER 14 What if Your Loan Doesn’t Close? Reasons Your Loan Might Not Close as Expected. Something Bad Popped Up on Your Credit. Your Job Situation Changed. The Title Wasn’t Clear. The Appraisal Was Reviewed Again and Rejected. Fraud Was Discovered. The Funder Made an Error in Wiring. Your File Grew Legs and Walked Away. Natural or National Disaster Strikes. Coming Up. CHAPTER 15 Controversial Lender Laws. Maximum Profit Allowed by Law. Illegal Kickbacks. Should Back-End Commissions Be Illegal? Three Ways YSP Is a Benefit to Borrowers. Coming Up. CHAPTER 16 A Peek inside the Mortgage Industry. Behind Closed Doors. Secrets of the Underwriting Department. Bribes. Disappearing Documents. Playing Favorites. Secrets of the Sales Office. Phony Specials. Three Ways Wholesalers Compete. The Bank’s Bag of Tricks. Why Minorities Pay More. Scenes through a Hidden Camera. Snapshot of the Ugly Side of Wholesale Lending. Snapshot of Direct Lenders. Snapshot of Independent Loan Officers. Mortgage Stars Who Rock. Conclusion. INDEX.

Read more less