Derivative Instruments & Financial Engineering There are many different types of derivative instruments that can be used in financial markets. This paper will examine the various different types of futures contracts, (futures) that are available to be purchased in the marketplace. It will be shown what role they play in managing risk with multinational companies, portfolio managers, and institutional investors alike. It will also be touched on about how speculators can find opportunities for financial…

There are four types of basic financial statements. They are the balance sheet, income statement, statement of equity, and statement of cash flows. Each of these are taken into account as a source for the company and used for different reasons. Creditors, investors, and management all have different reasons for having more interests in the certain statements they choose to look at closer. The balance sheet shows the assets, liabilities and equity balances as of a given point in time. It will typically…

Classes and Financial Instruments Basic 1. What are the key differences between common stock, preferred stock, and corporate bonds? The key differences are that common stock has voting power, residual claim, and limited liability. Preferred stock on the other hand, behaves like a hybrid stock because it has preferred and common dividends, but also it behaves like the corporate bonds because it has fixed income and is non-voting characteristics. Finally, corporate bonds are instruments of debt…

INTRODUCTION - FINANCIAL INSTRUMENTS In today’s world of Globalization, we are witnessing free trade agreements between different countries, international exchanges are multiplying, and commercial barriers are falling. Hence competition is measured on global scale. In this wave of globalization, financial instruments have been growing at an incredible pace. We are currently witnessing a rapid expansion phenomenon of the use of the financial instruments in the international financial market. These…

Investment Accounting Investment accounting is the recording and management of financial instruments such as stocks (equity) and bonds (debt). Why Invest? Investors make investments to have them appreciate in market value, earn income from interest and dividends, or to have influence or control of another company. Basic Journal Entry (j/e): Debit (DR) Investment $cost, including commissions Credit (CR) Cash $Cost, including commissions. The methods of accounting for investments, depends on the intended…

In the business world, business accounting embraces many professional and trade skills and abilities, such as being able to gather, record, summarize and analyse financial transactions. It is studied and known that business accounting is useful in people’s everyday lives. This report is going to be about basic financial and management accounting principles and techniques used in today’s working society, with the aim to introduce how daily transactions activities are partaken in the working environment…

Basic Financial Statements Accountants, business owners, investors, creditors and employees use four basic financial statements of an organization to determine the financial well-being and future earnings potential of that organization. Financial statements are a key tool in seeing and understanding the past, present and future condition of an organization. What are these financial statements and what do they mean to the reader? Do the financial statements mean something completely different to…

When companies reach higher degrees of success, they will eventually find themselves in the position that they are generating more cash they can reasonably reinvest in the business. The financial crisis has caused investors to pressure companies to distribute the accumulated wealth back to shareholders. Typically, companies can return wealth to shareholders through stock price appreciations, dividends of stock buybacks. In the past, dividends was the more common form of wealth distribution. However…

still positive in both options even though it runs very close to negative levels in option 2 in year 4 and 5. This implies that anything worst than pessimistic case would lead to a financing inability for CPP, and hence increasing the likelihood of financial distress. In terms of value to existing shareholders in option 1, investors receive negative premium for 45% of CPP stakes. Thus, the value to existing shareholders is higher when financing with $75 Million debt, and therefore is more preferable…

Financial Market and Financial Instruments Market is simply defined as an area for potential exchanges. Thus market is a group of buyers and sellers interested in negotiating the terms of purchase or sales of goods and services. Similarly, financial market is that market is traded- loaned or borrowed-in-terms of different financial assets or instruments stocks and bonds are traded. "Securities" means shares, stock, bond, debenture, debenture stock issued by a corporate body or a certificate to unit…