Académique Documents
Professionnel Documents
Culture Documents
centres across India. We can now offer a full range of tailored advisory, financial and operational
services in both corporate and investment banking and also focus strongly on our consumer and
commercial offering in India. We take pride in our delivery culture, concentrating on excellence
in origination, execution and distribution globally.
Our Corporate and Institutional business, Global Markets, now has a strong offering in equities,
corporate finance, transaction services and mergers and acquisitions to the Indian market. Coutts
& Co and RBS Coutts International is the international private banking arm of the Royal Bank of
Scotland group, and manage assets of more than £40 billion for over 100,000 clients worldwide.
RBS International is one of the leading players in the UK offshore market, with a balance sheet
in excess of £20 billion. Our global reach will now extend to more than 50 countries, with more
than 40 million customers, confirming our position as a reliable funding partner. Our financial
strength and market power give us the tools to achieve effective results.
In 2007, RBS led the successful consortium bid for ABN AMRO, who has grown a strong
presence in India since 1921 when the first branch was opened in Kolkata. Since then the
coverage has extended to Mumbai, New Delhi, Chennai, Kolkata, Pune, Baroda, Hyderabad,
Bangalore, Surat, Noida, Gurgaon, Lucknow, Mangalore, Moradabad, Nasik, Panipat, Tirupur,
Salem, Udaipur, Kolhapur and Ahmedabad across 28 branches.
An investment bank is a financial institution that raises capital, trades in securities and manages
corporate mergers and acquisitions. Investment banks profit from companies and governments
by raising money through issuing and selling securities in capital markets (both equity, debt) and
insuring bonds (e.g. selling credit default swaps), as well as providing advice on transactions
such as mergers and acquisitions. A majority of investment banks offer strategic advisory
services for mergers, acquisitions, divestiture or other financial services for clients, such as the
trading of derivatives, fixed income, foreign exchange, commodity, and equity securities.
In terms of regulatory qualification, to perform these services in the United States, an adviser
must be a licensed broker-dealer, and is subject to Securities & Exchange Commission (SEC)
(FINRA) regulation[1]. Until 1999, the United States maintained a separation between
investment banking and commercial banks. Other industrialized countries (including G7
countries) have not maintained this separation historically. Trading securities for cash or
securities (i.e., facilitating transactions, market-making), or the promotion of securities (i.e.,
underwriting, research, etc.) was referred to as the "sell side".
Dealing with the pension funds, mutual funds, hedge funds, and the investing public who
consumed the products and services of the sell-side in order to maximize their return on
investment constitutes the "buy side". Many firms have buy and sell side components.
•Research is the division which reviews companies and writes reports about their prospects,
often with "buy" or "sell" ratings. While the research division generates no revenue, its
resources are used to assist traders in trading, the sales force in suggesting ideas to
customers, and investment bankers by covering their clients. There is a potential conflict
of interest between the investment bank and its analysis in that published analysis can
affect the profits of the bank. Therefore in recent years the relationship between
investment banking and research has become highly regulated requiring a Chinese wall
between public and private functions.
[edit] Other businesses that an investment bank may be involved in
•Global Transaction Banking is the division which provide cash management, custody
services, lending, and securities brokerage services to institutions. Prime brokerage with
hedge funds has been an especially profitable business, as well as risky, as seen in the
"run on the bank" with Bear Stearns in 2008.
•Commercial banking see article commercial bank. Examples being Goldman Sachs and
Morgan Stanley growing into the commercial banking businesses even before the
financial crises of 2008.
[edit] Middle office
•Risk management involves analyzing the market and credit risk that traders are taking onto
the balance sheet in conducting their daily trades, and setting limits on the amount of
capital that they are able to trade in order to prevent 'bad' trades having a detrimental
effect to a desk overall. Another key Middle Office role is to ensure that the above
mentioned economic risks are captured accurately (as per agreement of commercial terms
with the counterparty), correctly (as per standardized booking models in the most
appropriate systems) and on time (typically within 30 minutes of trade execution). In
recent years the risk of errors has become known as "operational risk" and the assurance
Middle Offices provide now includes measures to address this risk. When this assurance
is not in place, market and credit risk analysis can be unreliable and open to deliberate
manipulation.
•Corporate treasury is responsible for an investment bank's funding, capital structure
management, and liquidity risk monitoring.
•Financial control tracks and analyzes the capital flows of the firm, the Finance division is
the principal adviser to senior management on essential areas such as controlling the
firm's global risk exposure and the profitability and structure of the firm's various
businesses. In the United States and United Kingdom, a Financial Controller is a senior
position, often reporting to the Chief Financial Officer.
•Corporate strategy, along with risk, treasury, and controllers, often falls under the finance
division as well.
•Compliance areas are responsible for an investment bank's daily operations' compliance
with government regulations and internal regulations. Often also considered a back-office
division.
[edit] Back office
•Operations involves data-checking trades that have been conducted, ensuring that they are
not erroneous, and transacting the required transfers. While some believe that operations
provides the greatest job security and the bleakest career prospects of any division within
an investment bank[3], many banks have outsourced operations. It is, however, a critical
part of the bank. Due to increased competition in finance related careers, college degrees
are now mandatory at most Tier 1 investment banks.[citation needed] A finance degree
has proved significant in understanding the depth of the deals and transactions that occur
across all the divisions of the bank.
•Technology refers to the information technology department. Every major investment bank
has considerable amounts of in-house software, created by the technology team, who are
also responsible for technical support. Technology has changed considerably in the last
few years as more sales and trading desks are using electronic trading. Some trades are
initiated by complex algorithms for hedging purposes.
•Historically, equity research firms were founded and owned by investment banks. One
common practice is for equity analysts to initiate coverage on a company in order to
develop relationships that lead to highly profitable investment banking business. In the
1990s, many equity researchers allegedly traded positive stock ratings directly for
investment banking business. On the flip side of the coin: companies would threaten to
divert investment banking business to competitors unless their stock was rated favorably.
Politicians acted to pass laws to criminalize such acts. Increased pressure from regulators
and a series of lawsuits, settlements, and prosecutions curbed this business to a large
extent following the 2001 stock market tumble.[citation needed]
•Many investment banks also own retail brokerages. Also during the 1990s, some retail
brokerages sold consumers securities which did not meet their stated risk profile. This
behavior may have led to investment banking business or even sales of surplus shares
during a public offering to keep public perception of the stock favorable.
•Since investment banks engage heavily in trading for their own account, there is always the
temptation or possibility that they might engage in some form of front running. Front
running is the illegal practice of a stock broker executing orders on a security for their
own account before filling orders previously submitted by their customers, thereby
benefiting from any changes in prices induced by those orders.
Investment banking:
is a particular form of banking which finances capital requirements of an enterprises. Investment
banking assists as it performs IPOs, private placement and bond offerings, acts as broker and
carries through mergers and acquisitions.
Functions of Investment Banking:
Investment banks have multilateral functions to perform. Some of the most important functions
of investment banking can be jot down as follows: Investment banking help public and private
corporations in issuing securities in the primary market, guarantee by standby underwriting or
best efforts selling and foreign exchange management . Other services include acting as
intermediaries in trading for clients. Investment banking provides financial advice to investors
and serves them by assisting in purchasing securities, managing financial assets and trading
securities. Investment banking differ from commercial banking in the sense that they don't accept
deposits and grant retail loans. However the dividing line between the two fraternal twins have
become flimsy with loans and securities becoming almost substitutable ways of raising funds.
Small firms providing services of investment banking are called boutiques. These mainly
specialize in bond trading, advising for mergers and acquisitions, providing technical analysis or
program trading.
Investment banking is a field of banking that aids companies in acquiring funds. In addition to
the acquisition of new funds, investment banking also offers advice for a wide range of
transactions a company might engage in.
Venture capital is the term used when investors buy part of a company. A venture capitalist
places money in a company that is high risk and has a high growth. The investment is usually for
a period of five to seven years. The investor will expect a return on his money either by the sale
of the company or by offering to sell shares in the company to the public.
When investing venture capital, the investor may want receive a percentage of the company’s
equity, and may also wish to have a position on the director’s board. Always remember that an
investor who agrees to place venture capital in a company is looking to make a healthy return.
She can demand repayment by the sale of the company, asking for her funds back or
renegotiating the original deal.
There are three different types of venture capital investment. Early stage financing includes seed
financing, start-up financing and first stage financing. Seed financing refers to a small amount of
venture capital given to an entrepreneur or inventor who wishes to start a business. It may be
used to build a management team, for market research or to develop a business plan.
Start up financing refers to venture capital that is given when a business has been operating for
less than a year. Their product will not have been sold commercially yet, and they will just be
ready to start doing so. First stage financing is used when companies wish to expand their capital
and to proceed full scale and enter the public business arena.
Another type of venture capital investment is expansion financing. This covers second and third
stage financing and bridge financing. Second stage financing is an investment used to expand a
company that is already on its feet. The company is trading and has growing accounts and
inventories, although it may not yet be showing a profit.
Third stage financing is an investment to companies that are breaking even or becoming
profitable. The venture capital is used to expand the business. It may be used in the acquisition of
real estate or for further in-depth product development.
Bridge financing covers a variety of different meanings. It is a short term, interest only
investment. It is used when company restructuring is taking place. The money can also be used if
an initial investor wants to liquidate his position and sell his stock.
mergers:
A merger occurs when two companies combine to form a single company. A merger is very
similar to an acquisition or takeover, except that in the case of a merger existing stockholders of
both companies involved retain a shared interest in the new corporation. By contrast, in an
acquisition one company purchases a bulk of a second company's stock, creating an uneven
balance of ownership in the new combined company
The entire merger process is usually kept secret from the general public, and often from the
majority of the employees at the involved companies. Since the majority of merger attempts do
not succeed, and most are kept secret, it is difficult to estimate how many potential mergers
occur in a given year. It is likely that the number is very high, however, given the amount of
successful mergers and the desirability of mergers for many companies.
A merger may be sought for a number of reasons, some of which are beneficial to the
shareholders, some of which are not. One use of the merger, for example, is to combine a very
profitable company with a losing company in order to use the losses as a tax write-off to offset
the profits, while expanding the corporation as a whole.
Increasing one's market share is another major use of the merger, particularly amongst large
corporations. By merging with major competitors, a company can come to dominate the market
they compete in, giving them a freer hand with regard to pricing and buyer incentives. This form
of merger may cause problems when two dominating companies merge, as it may trigger
litigation regarding monopoly laws.
Another type of popular merger brings together two companies that make different, but
complementary, products. This may also involve purchasing a company which controls an asset
your company utilizes somewhere in its supply chain. Major manufacturers buying out a
warehousing chain in order to save on warehousing costs, as well as making a profit directly
from the purchased business, is a good example of this. PayPal's merger with eBay is another
good example, as it allowed eBay to avoid fees they had been paying, while tying two
complementary products together.
A merger is usually handled by an investment banker, who aids in transferring ownership of the
company through the strategic issuance and sale of stock. Some have alleged that this
relationship causes some problems, as it provides an incentive for investment banks to push
existing clients towards a merger even in cases where it may not be beneficial for the
stockholders.
brokerage:
A brokerage is a firm that acts as an intermediary between a purchaser and a seller. More
commonly, a brokerage is referred to as a brokerage firm. To broker a deal is to communicate
with both the buyer and seller as to acceptable price on anything sold or purchased.
A broker, a single person, or the brokerage firm completes any necessary legal paperwork,
obtains the appropriate signatures, and collects money from the purchaser to give to the seller.
Since the buyer and seller are employing the brokerage to complete the deal, the brokerage may
collect a portion of the money obtained. In some cases, a brokerage receives money from both
parties. In others, the brokerage receives a commission only from the seller.
Brokerage firms are most commonly thought of in relationship to the sale and purchase of stock
shares. Fees are variable, depending on the degree to which the brokerage is involved in
decisions about purchase. Some stockowners give their brokers power of attorney to make
decisions about when to buy or sell stock and depend upon their brokers for researching new
stock for purchase. This type of brokerage firm usually assesses a fairly large fee, and regardless
of whether the owner loses or earns money, the firm is paid.
Other brokerage firms are employed by people who like to do their own research and make all
their own decisions about what and when to buy and sell. These firms have a tendency to charge
per transaction and can be quite reasonable to employ. In the past few years, several brokerage
firms have begun stock trading on the Internet, allowing their clients access to information that
will help them carefully research their decisions. These companies are not a sound economical
choice for clients who do not do adequate research or cannot consistently read up on their stocks.
Extensive involvement by the stockowner is necessary to hopefully make the best deals.
In other areas of business, brokerage firms may be employed to acquire and sell real estate.
Brokerages exist to acquire art or antiquities. Also, restaurants and other service companies may
use brokerage firms to obtain meat and produce, restaurant supplies, or furniture. Sometimes,
employing a broker in this last sense is not initially expensive to the purchaser, because the
broker receives a fee from the companies used by their clients. However, the price of
merchandise obtained through a broker generally has a mark-up that makes up for this lack of
commission.
Brokerage firms can be helpful because they save their clients, whether buying or selling, time.
Not everyone has time to look at 40 real estate properties before purchasing. Not every restaurant
manager wants to interview a slew of potential food supply companies before selecting one.
mutual fund:
A mutual fund is a professionally managed type of collective investment scheme that pools
money from many investors and invests it in stocks, bonds, short-term money market
instruments, and/or other securities.[1] The mutual fund will have a fund manager that trades the
pooled money on a regular basis. The net proceeds or losses are then typically distributed to the
investors annually.
Since 1940, there have been three basic types of investment companies in the United States:
open-end funds, also known in the U.S. as mutual funds; unit investment trusts (UITs); and
closed-end funds. Similar funds also operate in Canada. However, in the rest of the world,
mutual fund is used as a generic term for various types of collective investment vehicles, such as
unit trusts, open-ended investment companies (OEICs), unitized insurance funds, and
undertakings for collective investments in transferable securities (UCITS).
NAV:
The net asset value, or NAV, is the current market value of a fund's holdings, less the fund's
liabilities, usually expressed as a per-share amount. For most funds, the NAV is determined
daily, after the close of trading on some specified financial exchange, but some funds update
their NAV multiple times during the trading day. The public offering price, or POP, is the NAV
plus a sales charge. Open-end funds sell shares at the POP and redeem shares at the NAV, and so
process orders only after the NAV is determined. Closed-end funds (the shares of which are
traded by investors) may trade at a higher or lower price than their NAV; this is known as a
premium or discount, respectively. If a fund is divided into multiple classes of shares, each class
will typically have its own NAV, reflecting differences in fees and expenses paid by the different
classes.
Some mutual funds own securities which are not regularly traded on any formal exchange. These
may be shares in very small or bankrupt companies; they may be derivatives; or they may be
private investments in unregistered financial instruments (such as stock in a non-public
company). In the absence of a public market for these securities, it is the responsibility of the
fund manager to form an estimate of their value when computing the NAV. How much of a
fund's assets may be invested in such securities is stated in the fund's prospectus.
[edit] Turnover
Turnover is a measure of the fund's securities transactions, usually calculated over a year's time,
and usually expressed as a percentage of net asset value.
This value is usually calculated as the value of all transactions (buying, selling) divided by 2
divided by the fund's total holdings; i.e., the fund counts one security sold and another one
bought as one "turnover". Thus turnover measures the replacement of holdings.
In Canada, under NI 81-106 (required disclosure for investment funds) turnover ratio is
calculated based on the lesser of purchases or sales divided by the average size of the portfolio
(including cash).
Derivative (finance)
A derivative is a financial instrument that is derived from some other asset, index, event, value
or condition (known as the underlying asset). Rather than trade or exchange the underlying asset
itself, derivative traders enter into an agreement to exchange cash or assets over time based on
the underlying asset. A simple example is a futures contract: an agreement to exchange the
underlying asset at a future date.
Derivatives are often leveraged, such that a small movement in the underlying value can cause a
large difference in the value of the derivative.
Derivatives can be used by investors to speculate and to make a profit if the value of the
underlying moves the way they expect (e.g. moves in a given direction, stays in or out of a
specified range, reaches a certain level). Alternatively, traders can use derivatives to hedge or
mitigate risk in the underlying, by entering into a derivative contract whose value moves in the
opposite direction to their underlying position and cancels part or all of it out.
Derivatives are usually broadly categorised by:
•The relationship between the underlying and the derivative (e.g. forward, option, swap)
•The type of underlying (e.g. Freight derivatives based on Baltic Exchange shipping indices),
equity derivatives, foreign exchange derivatives and credit derivatives)
Uses
[edit] Hedging
A technique designed to eliminate or reduce risk.
Derivatives allow risk about the price of the underlying asset to be transferred from one party to
another. For example, a wheat farmer and a miller could sign a futures contract to exchange a
specified amount of cash for a specified amount of wheat in the future. Both parties have reduced
a future risk: for the wheat farmer, the uncertainty of the price, and for the miller, the availability
of wheat. However, there is still the risk that no wheat will be available because of events
unspecified by the contract, like the weather, or that one party will renege on the contract.
Although a third party, called a clearing house, insures a futures contract, not all derivatives are
insured against counterparty risk.
From another perspective, the farmer and the miller both reduce a risk and acquire a risk when
they sign the futures contract: The farmer reduces the risk that the price of wheat will fall below
the price specified in the contract and acquires the risk that the price of wheat will rise above the
price specified in the contract (thereby losing additional income that he could have earned). The
miller, on the other hand, acquires the risk that the price of wheat will fall below the price
specified in the contract (thereby paying more in the future than he otherwise would) and reduces
the risk that the price of wheat will rise above the price specified in the contract. In this sense,
one party is the insurer (risk taker) for one type of risk, and the counterparty is the insurer (risk
taker) for another type of risk.
Hedging also occurs when an individual or institution buys an asset (like a commodity, a bond
that has coupon payments, a stock that pays dividends, and so on) and sells it using a futures
contract. The individual or institution has access to the asset for a specified amount of time, and
then can sell it in the future at a specified price according to the futures contract. Of course, this
allows the individual or institution the benefit of holding the asset while reducing the risk that the
future selling price will deviate unexpectedly from the market's current assessment of the future
value of the asset.
Derivatives serve a legitimate business purpose. For example a corporation borrows a large sum
of money at a specific interest rate.[1] The rate of interest on the loan resets every six months.
the corporation is concerned that the rate of interest may be much higher in six months. The
corporation could buy a forward rate agreement. A forward rate agreement is a contract to pay a
fixed rate of interest six months after purchases on a notional sum of money.[2] If the interest
rate after six months is above the contract rate the seller pays the difference to the FRA buyer,
the corporation. If the rate is lower the corporation would pay the difference to the seller. The
purchase of the FRA would serve to reduce the uncertainty concerning the rate increase and
stabilize earnings.
Types of derivatives
OTC and exchange-traded
Broadly speaking there are two distinct groups of derivative contracts, which are distinguished
by the way they are traded in the market:
•Over-the-counter (OTC) derivatives are contracts that are traded (and privately
negotiated) directly between two parties, without going through an exchange or other
intermediary. Products such as swaps, forward rate agreements, and exotic options are
almost always traded in this way. The OTC derivative market is the largest market for
derivatives, and is largely unregulated with respect to disclosure of information between
the parties, since the OTC market is made up of banks and other highly sophisticated
parties, such as hedge funds. Reporting of OTC amounts are difficult because trades can
occur in private, without activity being visible on any exchange. According to the Bank
for International Settlements, the total outstanding notional amount is $684 trillion (as of
June 2008)[4]. Of this total notional amount, 67% are interest rate contracts, 8% are
credit default swaps (CDS), 9% are foreign exchange contracts, 2% are commodity
contracts, 1% are equity contracts, and 12% are other. Because OTC derivatives are not
traded on an exchange, there is no central counterparty. Therefore, they are subject to
counterparty risk, like an ordinary contract, since each counterparty relies on the other to
perform.
•Exchange-traded derivatives (ETD) are those derivatives products that are traded via
specialized derivatives exchanges or other exchanges. A derivatives exchange acts as an
intermediary to all related transactions, and takes Initial margin from both sides of the
trade to act as a guarantee. The world's largest[5] derivatives exchanges (by number of
transactions) are the Korea Exchange (which lists KOSPI Index Futures & Options),
Eurex (which lists a wide range of European products such as interest rate & index
products), and CME Group (made up of the 2007 merger of the Chicago Mercantile
Exchange and the Chicago Board of Trade and the 2008 acquisition of the New York
Mercantile Exchange). According to BIS, the combined turnover in the world's
derivatives exchanges totaled USD 344 trillion during Q4 2005. Some types of derivative
instruments also may trade on traditional exchanges. For instance, hybrid instruments
such as convertible bonds and/or convertible preferred may be listed on stock or bond
exchanges. Also, warrants (or "rights") may be listed on equity exchanges. Performance
Rights, Cash xPRTs and various other instruments that essentially consist of a complex
set of options bundled into a simple package are routinely listed on equity exchanges.
Like other derivatives, these publicly traded derivatives provide investors access to
risk/reward and volatility characteristics that, while related to an underlying commodity,
nonetheless are distinctive.
Leverage (finance)
Financial leverage
Financial leverage (FL) takes the form of a loan or other borrowings (debt), the proceeds of
which are (re)invested with the intent to earn a greater rate of return than the cost of interest. If
the firm's rate of return on assets (ROA) is higher than the rate of interest on the loan, then its
return on equity (ROE) will be higher than if it did not borrow because assets = equity + debt
(see accounting equation). On the other hand, if the firm's ROA is lower than the interest rate,
then its ROE will be lower than if it did not borrow. Leverage allows greater potential returns to
the investor that otherwise would have been unavailable but the potential for loss is also greater
because if the investment becomes worthless, the loan principal and all accrued interest on the
loan still need to be repaid.
Margin buying is a common way of utilizing the concept of leverage in investing. An unlevered
firm can be seen as an all-equity firm, whereas a levered firm is made up of ownership equity
and debt. A firm's debt to equity ratio is therefore an indication of its leverage. This debt to
equity ratio's influence on the value of a firm is described in the Modigliani-Miller theorem. As
is true of operating leverage, the degree of financial leverage measures the effect of a change in
one variable on another variable. Degree of financial leverage (DFL) may be defined as the
percentage change in earnings (earnings per share) that occurs as a result of a percentage change
in earnings before interest and taxes.
Operating leverage
Operating leverage reflects the extent to which fixed assets and associated fixed costs are utilized
in the business. Degree of operating leverage (DOL) may be defined as the percentage of
leveraging.
Hedge (finance)
In finance, a hedge is a position established in one market in an attempt to offset exposure to
price fluctuations in some opposite position in another market with the goal of minimizing one's
exposure to unwanted risk. There are many specific financial vehicles to accomplish this,
including insurance policies, forward contracts, swaps, options, many types of over-the-counter
and derivative products, and perhaps most popularly, futures contracts. Public futures markets
were established in the 1800s to allow transparent, standardized, and efficient hedging of
agricultural commodity prices; they have since expanded to include futures contracts for hedging
the values of energy, precious metals, foreign currency, and interest rate fluctuations.
Investment management
:Investment management is the professional management of various securities (shares, bonds
etc.) and assets (e.g., real estate), to meet specified investment goals for the benefit of the
investors. Investors may be institutions (insurance companies, pension funds, corporations etc.)
or private investors (both directly via investment contracts and more commonly via collective
investment schemes e.g. mutual funds or Exchange Traded Funds) .
The term asset management is often used to refer to the investment management of collective
investments, (not necessarily) whilst the more generic fund management may refer to all forms
of institutional investment as well as investment management for private investors. Investment
managers who specialize in advisory or discretionary management on behalf of (normally
wealthy) private investors may often refer to their services as wealth management or portfolio
management often within the context of so-called "private banking".
The provision of 'investment management services' includes elements of financial analysis, asset
selection, stock selection, plan implementation and ongoing monitoring of investments.
Investment management is a large and important global industry in its own right responsible for
caretaking of trillions of dollars, euro, pounds and yen. Coming under the remit of financial
services many of the world's largest companies are at least in part investment managers and
employ millions of staff and create billions in revenue.
Fund manager (or investment adviser in the U.S.) refers to both a firm that provides investment
management services and an individual who directs fund management decisions.
Portfolio manager:
A portfolio manager is a person who makes investment decisions using money other people
have placed under his or her control. In other words, it is a financial career involved in
investment management. They work with a team of analysts and researchers, and are ultimately
responsible for establishing an investment strategy, selecting appropriate investments and
allocating each investment properly for a fund- or asset-management vehicle.
Portfolio managers are presented with investment ideas from internal buy-side analysts and sell-
side analysts from investment banks. It is their job to sift through the relevant information and
use their judgment to buy and sell securities. Throughout each day, they read reports, talk to
company managers and monitor industry and economic trends looking for the right company and
time to invest the portfolio's capital.
Portfolio managers make decisions about investment mix and policy, matching investments to
objectives, asset allocation for individuals and institutions, and balancing risk against.
performance.
Portfolio management is about strengths, weaknesses, opportunities and threats in the choice of
debt vs. equity, domestic vs. international, growth vs. safety, and other tradeoffs encountered in
the attempt to maximize return at a given appetite for risk.
In the case of mutual and exchange-traded funds (ETFs), there are two forms of portfolio
management: passive and active. Passive management simply tracks a market index, commonly
referred to as indexing or index investing. Active management involves a single manager, co-
managers, or a team of managers who attempt to beat the market return by actively managing a
fund's portfolio through investment decisions based on research and decisions on individual
holdings. Closed-end funds are generally actively managed.
Retrieved from "http://en.wikipedia.org/wiki/Portfolio_manager"
Portfolio Management is used to select a portfolio of new product development projects to
achieve th following goals:
•Provide balance
•Heuristic models
•Scoring techniques
What is Beta?
Beta is an indicator that measures how closely related the movement of a stock is to a broad
index of stocks, like the S&P 500. Every stock has a beta value. The following will help you
interpret what those beta values indicate:
Beta = 1
Indicates that the stock moves in tandem with the S&P 500. If the S&P 500 goes up, the stock
will usually go up. If the S&P 500 goes down, the stock will usually go down.
Beta > 1
Indicates that the stock moves in the same direction as the S&P 500, only faster. If the S&P 500
goes up, the stock will usually go up faster. If the S&P 500 goes down, the stock will usually go
down faster.
Indicates that the stock moves in the same direction as the S&P 500, only slower. If the S&P 500
goes up, the stock will usually go up slower. If the S&P 500 goes down, the stock will usually go
down slower.
Beta < 0
Indicates that the stock moves in the opposite direction as the S&P 500. If the S&P 500 goes up,
the stock will usually go down. If the S&P 500 goes down, the stock will usually go up.
By maintaining a portfolio of stocks that have different betas, you protect yourself from having
all of your stocks drop in value at the same time.
equities
Definition
An instrument that signifies an ownership position, or equity, in a corporation, and represents a
claim on its proportionate share in the corporation's assets and profits. A person holding such an
ownership in the company does not enjoy the highest claim on the company's earnings. Instead,
an equity holder's claim is subordinated to creditor's claims, and the equity holder will only enjoy
distributions from earnings after these higher priority claims are satisfied. also called equities or
equity securities or corporate stock.
Equity
Ownership interest in a firm. Also, the residual dollar value of a futures trading account,
assuming its liquidation is at the going trade price. In real estate, dollar difference between what
a property could be sold for and debts claimed against it. In a brokerage account, equity equals
the value of the account's securities minus any debit balance in a margin account. Equity is also
shorthand for stock market investments.
What Does Equity Market Mean?
The market in which shares are issued and traded, either through exchanges or over-the-counter
markets. Also known as the stock market, it is one of the most vital areas of a market economy
because it gives companies access to capital and investors a slice of ownership in a company
with the potential to realize gains based on its future performance.
http://ads.forbes.com/RealMedia/ads/click_lx.ads/investopedia.com/pf/19368
79455/x85/OasDefault_v5/default/empty.gif/657147742b5572314745514144
4d4548
A stock market is a public market for the trading of company stock and derivatives at an agreed
price; these are securities listed on a stock exchange as well as those only traded privately.
What Does Stock Market Mean?
The term for the overall market in which shares are issued and traded on exchanges or in over-
the-counter markets. Also known as the equity market, it is one of the most vital areas of a
market economy because it provides companies with access to capital and allows investors to
own companies and participate in economic growth.
Investopedia explains Stock Market
The stock market is made up of the primary and secondary markets. The primary market is
where new issues (IPOs) first are offered, with any subsequent trading going on in the secondary
market.
Indian Equity Market
The Indian Equity Market is also the other name for Indian share market or Indian stock market.
The forces of the market depend on monsoons, global fundings flowing into equities in the
market and the performance of various companies. The Indian market of equities is transacted on
the basis of two major stock indices, National Stock Exchange of India Ltd. (NSE) and The
Bombay Stock Exchange (BSE), the trading being carried on in a dematerialized form. The
physical stocks are in liquid form and cannot be sold by the investors in any market. Two types
of funds are there in the Indian Equity Market, Venture Capital Funds and Private Equity Funds.
The equity indexes are correlated beyond the boundaries of different countries with their
exposure to common calamities like monsoon which would affect both India and Bangladesh or
trade integration policies and close connection with the foreign investors. From 1995 onwards,
both in terms of trade integration and FIIs India has made an advance. All these have established
a close relationship between the stock market indexes of India stock market and those of other
countries. The Stock derivatives adds up all futures and options on all individual stocks. This
stock index derivatives was found to have gone up from 12 % of NSE derivatives turnover in
2002 to 35 % in 2004. the Indian Equity Market also comprise of the Debt Market, dominated by
primary dealers, banks and wholesale investors.
Indian Equity Market at present is a lucrative field for the investors and investing in Indian
stocks are profitable for not only the long and medium-term investors, but also the position
traders, short-term swing traders and also very short term intra-day traders. In terms of market
capitalization, there are over 2500 companies in the BSE chart list with the Reliance Industries
Limited at the top. The SENSEX today has rose from 1000 levels to 8000 levels providing a
profitable business to all those who had been investing in the Indian Equity Market. There are
about 22 stock exchanges in India which regulates the market trends of different stocks.
Generally the bigger companies are listed with the NSE and the BSE, but there is the OTCEI or
the Over the Counter Exchange of India, which lists the medium and small sized companies.
There is the SEBI or the Securities and Exchange Board of India which supervises the
functioning of the stock markets in India.
In the Indian market scenario, the large FMCG companies reached the top line with a double-
digit growth, with their shares being attractive for investing in the Indian stock market. Such
companies like the Tata Tea, Britannia, to name a few, has been providing a bustling business for
the Indian share market. Other leading houses offering equally beneficial stocks for investing in
Indian Equity Market, of the SENSEX chart are the two-wheeler and three-wheeler maker Bajaj
Auto and second largest software exporter Infosys Technologies.
Other than some restricted industries, foreign investment in general enjoys a majority share in
the Indian Equity Market. Foreign Institutional Investors (FII) need to register themselves with
the SEBI and the RBI for operating in Indian stock exchanges. In fact from the Indian stock
market analysis it is known that in some specific industries foreigners can have even 100%
shares. In the last few years with the facility of the Online Stock Market Trading in India, it has
been very convenient for the FIIs to trade in the Indian stock market. From an analysis on the
Indian Equity Market it can be said that the increase in the foreign investments over the years no
doubt have accentuated the dynamism of the Indian market of equities. Foreign investors are
allowed to buy Indian equity for the purpose of converting the equity into ADR or GDR.
Thus, the growing financial capital markets of India being encouraged by domestic and foreign
investments is becoming a profitable business more with each day. If all the economic
parameters are unchanged Indian Equity Market will be conducive for the growth of private
equities and this will lead to an overall improvement in the Indian economy.
equities market
Hide links within definitionsShow links within definitions
Definition
Securities market in which common stock (ordinary shares) is traded. The US equities market,
for example, comprises of American Stock Exchange (AMEX), NASDAQ National Market, and
New York Stock Exchange (NYSE).
NASDAQ:
The full form of NASDAQ is National Association of Securities Dealers Automated Quotation
System, it is an American stock exchange. It is the largest electronic screen-based equity
securities trading market in the United States. With approximately 3,200 companies, it lists more
companies and has more trading volume per day than any other stock exchange in the world.
It was founded in 1971 by the National Association of Securities Dealers (NASD),
DOW JONES:
The Dow Jones Industrial Average also referred to as the Industrial Average, the Dow Jones,
the Dow 30, or simply as the Dow; is one of several stock market indices, created by Wall Street
Journal editor and Dow Jones & Company co-founder Charles Dow. The average is named after
Dow and one of his business associates, a statistician, Edward Jones. It is an index that shows
how certain large, publicly-owned companies have traded during a standard trading session in
the stock market.[1] Dow compiled the index to gauge the performance of the industrial sector
within the American economy. However, the performance of the Dow continues to be influenced
by not only corporate and economic reports, but also by domestic and foreign political events
such as war and terrorism, as well as by natural disasters that could potentially lead to economic
harm. It is the second oldest U.S. market index after the Dow Jones Transportation Average,
which Dow also created. The average is computed from the Dow Jones Indexes by the stock
prices of 30 of the largest and most widely held public companies in the United States. The
Industrial portion of the name is largely historical, as many of the modern 30 components have
little or nothing to do with traditional heavy industry. The average is price-weighted, and to
compensate for the effects of stock splits and other adjustments, it is currently a scaled average.
The value of the Dow is not the actual average of the prices of its component stocks, but rather
the sum of the component prices divided by a divisor, which changes whenever one of the
component stocks has a stock split or stock dividend, so as to generate a consistent value for the
index.
Along with the NASDAQ Composite, the S&P 500 Index, and the Russell 2000 Index, the Dow
is among the most closely-watched benchmark indices tracking targeted stock market activity.
Components of the Dow trade on both the NASDAQ OMX and the NYSE Euronext, two of the
largest stock market companies. Derivatives of the Dow trade on the Chicago Board Options
Exchange and through the CME Group, the world's largest futures exchange company.
BANK OF AMERICA
Profile of Bank Of America
Bank of America is one of the oldest American Banks. The Indian arm of the Bank Of America
has been operating since the 1960s. In 1999 the Bank of America had four branches in India. The
bank plans to increase its product range and client base for its Indian arm. Bank of America
Securities India Pvt Ltd, is a subsidiary of the Bank of America, India.
The Indian arm of Bank of America registered 80 % growth in its net profit to Rs 144 crores in
the fiscal year 2005 - 2006. Further, the net revenue earnings of the Indian arm of the bank rose
by 60% to Rs 398.9 crores during the same period. The Asset base of Bank of America, in India,
rose by 9% to Rs 6992.7 crores and return on assets grew by 2.4% during 2005-06.
The bank had zero non-performing assets (NPA) during the aforesaid period, as stated by Mr.
Vishwavir Ahuja, Managing Director and Country Executive Officer, India chapter. The bank
also maintained its rich history of quality service and offered highest interest. During the same
period it infused capital worth US $ 175 million in to India.
Derivatives are generally used as an instrument to hedge risk, but can also be used for speculative
purposes. For example, a European investor purchasing shares of an American company off of an
American exchange (using U.S. dollars to do so) would be exposed to exchange-rate risk while holding
that stock. To hedge this risk, the investor could purchase currency futures to lock in a specified
exchange rate for the future stock sale and currency conversion back into Euros.