Introduction

Activities Of The Capital Markets

The Markets

The US Markets

Global Markets

The Players

Brokers and Dealers

Banks

The US Treasury Department and the Other Federal Agencies

The Federal Reserve

The FOMC

International Investment Banks

The Clients

Institutional Investors

Retail Investors

Municipalities

Proprietary Trading

The Regulators

The Federal Reserve

The Treasury Department

The Comptroller of the Currency (OCC)

The SEC

Other Securities Regulators

Foreign Regulators

Pricing Issues Related To Capital Markets Instruments

Primary vs. Secondary Markets Pricing Issues

Interest Bearing vs. Discounted Issues

Time Value of Money

Future Value

Present Value

Calculating Yields and Rates of Return

Bond Equivalent Yield

Discount Rate vs. Bond Equivalent Yield

Money Market Yield

Yield to Maturity

Current Yield

Price Fluctuations in Discounted Issues

Price Quotes for Interest Bearing Securities

Pricing Bonds

Price Quotes

Accrued Interest

Call Provisions (Yield to Call)

Yield Measures for Floating Rate Securities

Exercise # I: Calculating Prices and Yields

Interest Rate Volatility and Capital Markets Instruments

Interest Rate Movements and Volatility

Interest Rate Volatility and the Capital Markets

The Relationship Between Interest Rates and Bond Prices

The Perception of Inflation

Other Price Volatility Issues

The Concept of Duration

Coupon Rate

Maturity Length

Credit Quality

Call Provisions

Exercise # 2: Volatility Scenario

The Concept of Risk

Risk Elements Related to Capital Markets Instruments

Interest Rate Risk

Credit Risk

Call Risk

Volatility Risk

Inflation Risk

Liquidity Risk

Currency Risk

Country Risk

Trading Strategies

Long vs. Short Portfolios

Hedging Techniques

Hedging for Interest Rate Risk

Synthetic Hedges

Arbitrage

Glossary

Exercise # I: Calculating Prices and Yields

Exercise #2

Quiz