Financial Markets

topics

VAR: It means variance & value at risk.
1% one-year value at risk of 10 million, it means that there is a 1% chance that the portfolio will lose 10 million in one year.

stress test: The idea of a stress test is that, let's look at a portfolio not just by its historical returns and how variable they are, but let's look at the details of the portfolio and ask what vulnerabilities there are for various kinds of financial crisis because what actually stresses firms the most are crisis, it's not just normal variation.

如果把某股票每个月的收益率用散点图和SP500的画在一起，看两者散点图分别组成的斜线，如果某股票的斜率更高，说明它的波动比市场更剧烈，市场涨的时候它涨的多，跌也跌得快。

（横轴是SP500的收益，纵轴是apple的）

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Capital Asset Pricing Model (CAPM):

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y (某只股票的收益率) = beta * x (整个市场的收益率) + alpha
beta 代表了 systematic risk，是某只股票随着整体市场的波动
而散点图上在拟合斜线上方和下方的点，代表着 idiosyncratic risk（属于个别股票的自有风险），也就是这个公司独有的一些风险，比如乔布斯逝世带给苹果估价的变化。

gold 的beta其实是负的，当市场不好的时候，大家就会避险买黄金，反而gold会好~

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无风险收益率（Risk-free rate of return）是指把资金投资于一个没有任何风险的投资对象所能得到的收益率。所以其实如果某个投资的收益率高，其实就是他的beta高，也就是风险高。

Finance不遵从正态分布，而是 Cauchy Distribution (fat tail)，正态分布的上上下下很平均，但是 Cauchy 在某些时刻震荡（比如黑天鹅）更剧烈：

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如果是正态分布，涨跌超过20%的概率极小，但是它的确出现了，所以并不是totally正态分布：

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COV: covariance, 两个投资的相关性，如果完全不相干，收益概率是0，如果收益算出来是正的就是正相关，反之是负相关。投资的时候需要考虑相关性，最好不要投相关性大的。

两家公司分别由0.5的概率可以成功赚到1w块钱或者亏1w，那么
总体收益 =两者都成功 0.25 * (1 + 1) + 一个成功一个失败 0.5 * (1 - 1) + 两者都失败 0.25 * (-1 -1) = 0，即无相关性。
如果两者都成功是 0.5 的概率，都失败是 0，那么就是正相关。

Insurance
Risk Pooling: 保险公司其实是把risk都聚合到一起，根据 Large Number Law，the number of bad outcomes are fairly predictable. The insurance company pools all these risks, and by the Law of Large Numbers is not really risky in itself.

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就像摇色子其实摇的次数越多，平均约接近3.5。但是保险公司还有 moral hazard，就是比如当你的house买了保险，而他出售的价格低于保险金额，你可能会烧了他...

身体不好的人会偏向于买 health insurance，所以exam是必须的。you have to deal with selection bias the best you can by exams and disclosure and also by mandatory. 但奥巴马之前有一个条例就是保险公司不应该做pre-examination并根据结果决定是不是要接受顾客购买保险。

任何投资都是有风险的
So the idea is that risk is inherent to investing. You can't, ultimately, people who are providing you with investment opportunities are doing something in the real world, which is risky. And if it weren't risky, it wouldn't be giving you an extra return.

通过资产配置分散风险。You have to manage your risk by diversifying across a number of different assets, not putting all your eggs in one basket. 以及单个股票的盈亏不重要，total portfolio (投资组合) 更重要。

hedge funds 对冲基金，不对大众，target family office.
short sale hold negative assets, 做空。borrow and sale.
security price 证券价格

但 CAPM 其实是不允许做空的，因为如果最好的投资组合包括做空，那么大家就都去做空另外，没有人有股票借给你了。

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如果 cov 是负的，两种投资走势趋近相反，那你的组合 VAR 反而是小的；如果两者 cov 是正的，走势趋同，波动就会大 VAR 也就大。

Efficient Portfolio Frontier

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相同 risk / standard deviation 的情况下肯定选 annual return 更高的，所以抛物线 return 10%以下的部分应该避免。

Gordon Growth Model 戈登模型：

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即使是 r (Discount Rate, risk) 大于 g (gross rate) 增长的资产，仍旧是有当前价值 PV 的，只要你的购买金额小于 PV 就是可以购买的好的投资，不是所有下降的资产都是不可以投资的。

根据 gordon 定律如果股价高，那么要不是 risk 小，要不是gross rate大。

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Index Debt 指数债券，防止因为通胀而造成的货币波动。例如最早美国士兵会被给予货币债券，因为战争他们手上的钱会变动很快，于是他们想出了 index debts，比如大米指数，和实物绑定避免通胀。

房价波动 risk: Well, but let me put it this way that most of our risks are still not managed well, for example, your home price risk. That is borne by you, the homeowner. I actually work with the Chicago Mercantile Exchange and we do have a futures market for single, and an options market, for single family homes so that you can buy a put option on your house to protect you against the big fall.

Efficient Markets Hypothesis
大家习惯性预测未来的股票趋势会重复过去的，但是实际上这些都是 random walk 不应该依赖于过去的走势。
AR-1: 最终会回到起点
Random walk: 完全random，类似醉汉

An efficient market is defined as one in which asset prices quickly and fully reflect all available information.

What I'm trying to convey is efficient markets theory is a, I'll say it again, is a half truth. There are a lot of smart people investing. But a lot of that smartness is devoted to marketing and manipulation of your psychology.

Information Tech

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大家在听到新消息的时候会在很快的时间做出决定买入或者卖出，有的时候甚至跟风卖完突然很迷惑为什么之前要卖，然后再买回来。但是其实所有消息都已经含在当前的股价内了，无论是内幕消息还是public消息。

Behavioral Finance (与effective market相反，人类不会完全根据信息做决定，人的行为有很多影响和心理因素）
Prospect theory shows that people are “irrational” and their economic decisions are suboptimal. In particular, people have a skewed representation of probability, and they do not treat gains and losses equivalently.

如果掷骰子，正面给你200，反面你给我100，你会不会接受？因为负100的value/emotion会比正200高可能，你就会犹豫：

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So why are they doing, isn't this irrational behavior? You've already bought the car, why bother to read any ads? But on the other hand, why would you selectively ignore the ads for the other cars? You're just trying to make yourself feel good, right? And so, it's irrational behavior. Once you've made a decision, you kind of identify with that decision and it's me. Now I want to hear more about why I was right. I don't want to hear that I might be wrong.

people will bet more on a coin not yet tossed. 比如明明知道自己 vote 不会改变结果还是会去vote。

Framing effect 是指人们对一个客观上相同问题的不同描述导致了不同的决策判断。

Interests
shortest = overnight rate

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Why are they lending to another bank at a negative rate?(Europe) It's costly to store cash. First of all, if it becomes known that you have large amounts of cash in your vault, thieves might come and steal it, so you have to buy insurance against that. And then the insurance company will impose costs on you. Plus you have to hire those trucks to drive it. You know, it's not set up... Banks don't hold huge amounts of cash in their vaults. So yeah, so you've got to hire trucks and armed guards and it sounds.. So to store a billion dollars, you need a big vault. So you have to buy a new vault. It's silly things like that that allow negative interest rates.

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贴现债券 discount bonds：以低于票面价格售出，到期偿还票面价格，相当于提前支付利息。

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每年可以支取C，最后一年支取本金+C：

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real rate = interest rate - inflation rate

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Leverage
So what ends up happening in a deflation is that the debtors get beaten down. The optimists have less wealth in real terms and the pessimists have more because now the $100 that they loaned is worth a lot more. 如果通货紧缩，debt会变得更多，借钱的人会欠的更多。

Market Capitalization = value per par * amount of pars

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I think it might be very smart policy not to buy a home, to rent a home and invest in a broadly diversified portfolio which that should be less risky. But most people don't do that, and maybe they have good reasons.

Does non-profit status means that their revenues should never exceed their costs to maintain a non-profit status? >> Yeah, non-profit, maybe it's misleading. It doesn't mean that they don't make profits. It means that they don't distribute profits to shareholders. The purpose is not to distribute profits.

Companies do things called splits where they will break a share in 2, and call one share another 1.5 shares or 2 shares or whatever. They do that periodically. Why do they do that? It seems that companies think that there's an optimal price per share that encourages investors look right, feels right. And so they will change the number of shares from time to time to try to hit a target for the price per share.

So when a company pays a dividend, what happens to the share price? Well, very simple, it drops because the company used to have the money and now it doesn't. It paid it out. The share price pretty much has to drop and I don't suppose it always does. 如果公司每季度某一天会去pay dividends，那么这一天的股票大概率会跌。不是所有公司都会给投资者分红，一般小公司都不会，大公司也只有盈利明显以后才会。他们之所以会做这个事情也是担心伤害投资者，导致股票价格下跌。

The main difference between preferred and common stock is that preferred stock gives no voting rights to shareholders while common stock does. Preferred shareholders have priority over a company's income, meaning they are paid dividends before common shareholders.

So this is called dilution. When they issue more shares, your share in the company goes down, defined as the total of shares you have divided by total shares. So that if you're an initial shareholder you once owned a big fraction of the company. It keeps going down but the company keeps going up in value. But here's why they call it equity, because all common shareholders are equal. 如果公司需要融资增发股票，原有投资人的占比会降低，但公司整体估值增加（因为资本流入asset增加），那么其实原投资人的equity没变。

The company has issued new shares, so that I can be paid a dividend in shares. And I now have 105 shares, is that the same as getting $150 in cash? So the total number of shares went up by 5%. So I'm calculating what fraction of the company I own, it's the same!

Share Repurchase: 公司回购自己的股票，那么市场上的股票总数变少，如果你持有相同数量的股票，那么你的股票占比提高，和dilution相反。So share repurchase in a sense is like paying a dividend. It's an alternative way of paying a dividend. 回购会利好股票价格（如果是库存股留存，用于股权激励的回购不会利好），因为股票总量少了，而净利润暂时不会变动，所以每股收益增加了，而每股收益是股票估值的核心指标之一。和dividends的差别：dividend需要交税，但是repurchases只有在你卖的时候才需要交税。

that most of the return people have gotten historically from stocks is in dividends, not in capital gains.

你所买卖的股票价格到底是什么？其实是从dividends来的，如果一家公司说以后永远不分红，那么你的share也就没有意义了。

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P/E = price per share / earning per share. 比如如果是15，代表15年你可以收回原来的钱。P/E = 1/(r-g)，如果low P/E，那么就是r高或者g低。high growth companies should tend to have high PE, a low PE would be a low growth company.

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Recession
stock market drop, long-term interests lower than short-term interests 都预示着recession。人们不花钱了，新的投资项目就会cancel，很多人会被解雇，进入恶性循环。

Mortgage抵押贷款
mortgage和leverage的区别是什么？mortgage特指通过实物抵押借款，而leverage是杠杆，不一定通过实物抵押。

REIT: Real Estate Investment Trust. 不动产信托投资。DPPs are primarily for wealthy individuals, but REITs are not.

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PLAM: price-level adjusted mortgage 价格水平调整抵押，如果通胀很严重，对于贷款者而言会很惨，因为每年还款会增加，但是对于借款者可以抵抗通胀。

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CDO (Collateralized debt obligation) : 债务抵押证券业务
CMO (Collateralized Mortgage Obligation) : 抵押担保债券 一个典型的CMO一般地包含有数个“正规级”债券和一个“剩余级”债券
（以上就是次贷危机的债务包）

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Within-Firm Regulation: board of directors. 董事会，大多是part-time job，并且是good reputation。他们需要确保没有tunneling的行为。

如何steal from company:

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比如低价出售公司资产，或者和朋友签订高于市场价的采购合同，高年薪，借给朋友钱但是并不需要还等...

Trade Group: 商业集团，大家一起签订合约比如不以某个价格出售股票。

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Front-Running: 如果你要买很多股票，会对股票价格造成波动那种，你的stock trader可能自己也会买，并且可能告诉别人。

International Regulation: G20, The Bank for International Settlements, Basel, Financial Stability Board

the basic thing that we want to get across is that regulation has always been the secret to success of free markets. That is, the markets have to be regulated within limits.

Default: 未履行债务

Forward Contract: 先约定好合同，然后到期以合同价格交易，比如rice trade，你需要担心你的counterpart是否可以履行合约

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forward exchange rate，如果我现在有100美金，然后换算成日元，再以Rj的利率存在银行，那么在一年后你有 100 * 旧换算利率 * (1 + Rj)，而美元的存款利率是Rd的话，那么一年后的换算利率 = 当前换算利率 * (1 + Rj)/(1 + Rd)。

Forward rate agreements: 远期利率协议是一种远期合约，买卖双方客户与银行或两个银行同业之间商定将来一定时间点利息开始的一定期限的协议利率，并规定以何种利率为参照利率，在将来利息起算日，按规定的协议利率、期限和本金额，由当事人一方向另一方支付协议利率与参照利率利息差的贴现额。

Future Contract: make your contract with the intermediary, not with the ultimate counter party. 当你签订合同以后，你需要支付，如果你是借钱来支付的话，当你购买的货物价格低于你借的钱，你会被要求补钱或者卖掉asset（类似股票的杠杆）

spot price: 现货价格
margin: 保证金

如何防止价格波动并买到质量好的产品：If you are buying expecting to buy good coffee let's say next year, you can lock in the price by buying the ordinary stuff on the futures exchange, and then any price fluctuations which will probably be shared by both types of coffee will affect your futures contract and you can close out, sell out your futures contract just before you would have bought the good stuff. And you've protected yourself against price fluctuations because the two probably move together. So most futures contracts are closed out without delivery.

Farmers and warehouses generally do not sell commodities using futures. They just use them to hedge prices.

期货作为一种金融衍生品，主要被用来对冲现货市场带来的风险。期货是从远期合约发展而来的一种标准化合约，就是和别人签订一份购买远期商品的合约，从而达到套期保值的目的。

种植农产品的用户，担心未来现货商品价格下跌，这样秋收之后卖不了好价钱，辛苦一年就会付诸东流，因此就和别人签订合约，假设三个月后某产品的价格下降，就按照合约的价格执行，这样就达到了套期保值的目的。

如果你是farmer，到期的时候不想或者没有足够的rice交货，那么你可以卖掉你之前的合同。

Chicago Board of Trade (CBOT) / CME Group: 规定了指定重量和delivery standard的货物的价格。farmer可以通过CBOT交易，因为他们相信CBOT的价格和本地价格趋势是一致的，但是可以不履行合约，所以其实大部分的合约最后都close out减价抛售了。

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所以期货合约可以锁定成本或者收入，无论即期价格如何变化，超出或者少于合约的价格，最后都会由期货交易所补足或者收取，而你可以以即期的价格向本地供应商买卖即可，方便了异地的交易。

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cash settlement 现金交割，比如SP500或者是房地产期货，都是不能实物交割的，但是可以用现金去交易，也就是到期时的spot price和你的合约价格差就是你的利润。

未来价格：（harvest不适用，因为丰收季节大家都不storage）

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在某些情况下，storage cost可能是负的，比如做面包的老板为了防止没有wheat，而给你-2%的存储费让你保存小麦。

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congtango结构和back结构也是可以互相转化的。比如化工品某品种本来是contango结构，因为近期装置大规模检修停车，本来供应宽松的局面直接因为供应减少发生逆转。现货开始走强，逐步转变为back结构。

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FFR Futures 联邦基金利率期货是近期利率的提现，而SPI股票的估值其实是未来分红的预期，关注的是很远以后的未来，两者的time range不同。

Options期权

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买一个可以以多少价格买的权利->call option
option是可以选择是不是到时候要买的，但是forward contract是不可以选择的，是你承诺要买

an exercise date or a strike date. That's the date when the option expires, and you either have to buy if it's a call, or sell if it's a put. And if you don't, then the option becomes worthless. And forever after it's worthless, it's expired.

It also specifies as the exercise price or a strike price. Which is the price at which you are, in a call option case, have the right to buy, and in the put option case, where you have the right to sell.

举个例子，如果你知道在某个农场旁边要建大型商业了，你可以和农场主说我要买一个call option，就是你农庄的购买权，但是只是一个option，是有过期时间的，如果过期我仍旧没有买，那么购买option的钱也是你的，那他可能就会很乐意。

CBOE: Chicago Board Options Exchange

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为什么要以高于当前股票价格的价格购买option？因为你认为会涨，如果购买option以后股票涨了你可以选择买入，但是如果跌了你可以选择不买。而已当前价格买入后，跌了你就真的赔钱了，risk更大。

Well, here is the strike prices. $27 a share, $30 a share, $32 a share, and $35 a share. And now, the price per share is 31. This is a right to buy it for more than it's selling for today. So, it's out of the money. So, I wouldn't want. Why would anyone want this option, if it's a right to buy the share for more than it costs to buy it? Well, I'll tell you why someone would buy this option. Because it might go up. The price might go up. And you say, well, if you think it might go up, why don't you just buy the share? Well, but if I buy the share, I'm incurring a risk that it might go down. I could lose. I have to pay $31 to get a share. I could lose the whole thing if there was some really bad news. But here, when I buy the option, I'm only paying $2.36. So, I'm not risking as much.

如果是27的是不是就可以买了瞬间就卖？也不是的，当前价格31，你购买option时6刀+27刀=33刀，所以只有涨到33以后才是值的。

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there's another way to insure yourself against losses on the stocks you own. It's something called a stop-loss order. 告诉你的broker，当价格低到某个点以后替你卖掉。

Investment Banks

Commercial banks take deposits and make loans. Investment banks don't take deposit and don't make loans. But in fact they under write securities. 也就是他们会作为中间人给企业或者政府之类的融资，投资银行和商业银行不一样，他不会有存款贷款之类的业务，也没有ATM机器。有些银行会不是totally的投资银行，可能也有存款，但是投资只是作为他的一个部门。

投行有点类似咨询公司，但是投行不单单给你建议，他还知道钱在哪里，并且其实它有一定的责任去了解你为什么需要钱，对融资公司进行调查研究承担一部分风险。

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如果你公司想要issue new share，但是又担心对公众发行新股票会让公众产生担忧，和银行贷款也有可能拿不到，那么你可能找到投行谈好一个价格卖掉你的新股票。投行以低价（他们肯定希望可以低买高卖的）买入你的股票，在一段时间以后再出售。还有一种是他们试着帮你卖掉这个股票。

其实投行可以叫做是salesman，你自己无法卖出你们公司的新股票，是因为大家不知道你，也不信任你。而投行作为中介机构，他其实承担了信任的部分，因为投资者信任投行。

An underwriting syndicate (承销财团) is a band of investment banks and broker dealers who come together to sell new offerings of equity or debt securities of a firm to investors when the issue is too large for a single firm to handle. The syndicate takes on inventory risk by committing to purchase the full issue upfront, and selling it afterwards to investors in the market. It is compensated by the underwriting spread, which is the difference between the price paid to the issuer, and the price received from investors.

aftermarket: underwriting syndicate 在卖掉new share以后，如果股价下跌，他们会出手买入以保持稳定，防止投资者在买入短期内亏损对投行失去信心。这种虽然有点像manipulation，但是确实是被允许和广泛做的事情。

IPO: initial public offering
An offering of a shares in a company for the first time publicly. It's been documented that the price in the aftermarket tends to be higher than the offering price in an IPO. This is a well-known fact. It jumps immediately.

They under-price the offer and from what they know they could get, that way it sells out quickly, it looks great. 如果你有一些钱想要参加IPO，你去找投行他们是不会让你参与的，因为其实IPO是under price的，所以他们只会把参与的机会给自己喜欢的客户。

Now the other thing is this manipulation is in some sense too successful because in the long run, IPO prices tend to fall. Jay Ritter whose a professor at University of Florida, wrote a famous article in 1991 said that, at least as of 1991, the average IPO jumped 16 percent on the first day in the aftermarket. 但长期看的话其实IPO的价格会跳水的，所以其实投行并不愿意卖给一些第一天就会抛售的人，这样他还需要aftermarket支持股票，他更希望卖给稳定的客户。

I was saying that the whole business of investment banking is about people. It's about trust, about building reputation. That's the asset.

Ratings Agencies
如果你不相信投行，你可以尝试相信 Ratings Agencies。It's an agency that publishes its information instead of keeping it secret for their favored clients.
但是有可能评分机构会收钱把评分调到你希望的分数。

Professional Money Managers: people who invests other people's money by taking over the management of their portfolio. 和commercial bank拿你的存款去投资loan和mortgage不太一样，Professional Money Managers拿你的钱投资股票债券。

Exchange, Broker, Dealer
Broker: someone who acts on behalf of others, that's the O, as an agent for which they earn a commission. Brings people together so that if someone who wants to buy a stock, he finds someone who wants to sell that. Puts the two together, charges a commission (佣金) for finding the other side.

Dealer: Always acts for himself. A dealer always acts for herself. In other words, as a principal in the transaction for which she makes a markup. It's typically a company that potentially involves both brokers and dealers. 他自己就拥有股票，高卖低买赚取差价。

Bad Behavior: broker通过交易赚取佣金，如果他们经常call you去鼓励你交易就可以获得更多佣金。减少交易次数。I don't think that high frequency trading is particularly adding value to the market, and in fact, it's siphoning money out.

bid price是买家愿意支付的最高价格，还有很多价格，不过都低于这个最高价位。ask price是卖家出的最低价格。

The government is just another organization that confronts markets and lenders like others and it always has going back into the history.

国债很少会被完全repudiate，因为如果这么做的话，以后你的人民就不会再借给你钱了，但是有可能会打折偿还如果经济很差。

国家监管经济，也会拥有公司的股权。

公司如果资不抵债的话，可以选择破产或者充足。破产是卖掉所有资产偿还债务，重组的话是你的公司仍旧有一些价值，比如正在做的研究是大家很value的。

Municipal Finance地方财政：The federal government is not gonna make laws about bankruptcy of state governments, but they do make laws about bankruptcies of municipal governments, cities. 地方政府会借钱做基础建设，为什么不加税实现呢？如果加税那么人民就不会来这个城市了，所以只能借钱。其实这就是赌做好基建以后一定会有很多人来生活，然后可以向这些人收税。