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Investment Pricing Methods: A Guide for Accounting and Financial Professionals

Investment Pricing Methods: A Guide for Accounting and Financial Professionals

Patrick Casabona , Robert M. Traficanti

ISBN: 978-0-471-17740-1

Dec 2001

384 pages

In Stock

$175.00

Description

Practical, expert coverage of investment pricing methods for financial professionals

This book on investment pricing methods offers accounting and financial practitioners and academics a solid understanding of the techniques and methods investment analysts use to price common financial investment instruments, such as commercial mortgages, private placement-bonds, mortgage-backed securities, private and public equities, derivatives, and joint ventures. Clarification of important terminology and an overview of fundamental concepts are provided for less experienced professionals, while in-depth and up-to-date discussion of technical matters offers experienced professionals expert dissection of more complex material. This authoritative and reliable guide features:

  • PowerPoint(TM) presentation for teaching purposes available online at www.wiley.com/go/investmentpricing
  • In-depth and up-to-date pricing models
  • Verbal and formula explanations for all mathematical equations
  • Tips on reviewing investment prices for accuracy or flaws
  • Investment type characteristics such as contractual provisions, cash flows, and risks for applying Statement 133 hedge effectiveness guidelines
  • Basic building blocks of investment pricing methodologies including present value methodologies used for pricing and evaluating common investment types
  • Coverage of complex issues including term structure of interest rates, determinants of bond yields and stock risk premiums, estimation of free cash flows for valuing a business entity, and more
Preface.

Acknowledgments.

1 Pricing Concepts and the Term Structure of Interest Rates.

Introduction.

Present Value Formula.

Duration and Other Fixed-Income Pricing Concepts.

Concluding Remarks.

Notes.

Appendix A: Calculation of U.S. Treasury Bond Yield Curve.

Appendix B: Eurodollar Futures Yields.

2 Fixed-Income Pricing Matrix and Decomposing Yields.

Introduction.

Determining the Discount Rate.

Credit Rating Categories and Determination.

Processes for Decomposing Bond Yields.

Normalized-Yield Pricing Matrix.

Concluding Remarks.

Notes.

3 Public Corporate Bonds, Private-Placement Bonds, and Whole Commercial Mortgages.

Introduction.

Key Terminology.

Publicly Issued Corporate Bonds.

Public Corporate Bond Pricing.

Private-Placement Bonds.

Valuing a Private-Placement Bond.

Pricing Bonds that Have Sinking-Fund Payment Requirements.

Pricing Defaulted Bonds.

Whole Commercial Mortgage Loans.

Valuing a Whole Commercial Mortgage Loan.

Monetary Default Scenarios.

Notes.

Appendix C: Bloomberg-Yield to Call Data.

Appendix D: Selected Portions of BondCalc (r) Brochures.

4 Mortgage-Backed and Asset-Backed Securities.

Introduction.

Evolution of the Mortgage-Backed Securities Market.

Mortgage-Backed Securities.

Collateralized Mortgage Obligations.

Bloomberg Median Prepayments.

Stripped Securities.

Private-Placement Asset-Backed Securities.

Concluding Remarks.

Notes.

5 Privately Held Equity.

Introduction.

Equity Volatility.

Pricing Equity Issues.

Common Equity Pricing Models Used by Investment Analysts.

Price-Multiple Equity Pricing Models.

Discounted Cash Flow Approach Equity Pricing Model.

Basic Framework of Private-Equity Investing.

Accountant's Review of Private-Equity Valuations.

Concluding Remarks.

Notes.

6 Public Equity Pricing.

Introduction.

""Fox Rocks"" Valuation Illustration.

Discounted Cash Flow Model.

Concluding Remarks.

Notes.

Appendix E: ""Fox Rocks"" Valuation Illustration.

7 Derivatives.

Introduction.

Forward Contracts.

Futures Contracts.

Option Contracts.

Swaps.

Credit Derivatives.

Forward Rate Agreements.

Notes.

Appendix F: Using Pricing Concepts of Fixed-Income Investments and Derivatives to Illustrate How to Hedge the Base Rate of Interest.

Appendix G: Fixed Income Option Strategies.

8 Partnerships.

Introduction.

Surfside Condominium Partnership.

Concluding Remarks.

Glossary.

References.

Index.