© K. Cuthbertson and D. Nitzsche

Figures for Chapter 1

MARKETS, FIRMS AND INVESTORS

(Investments : Spot and Derivatives

Markets)

© K. Cuthbertson and D. Nitzsche

Figure 1.1 : Brokers and dealers

Market Maker A

Market Maker B

Individual Investor

Broker

Institutional Investor

© K. Cuthbertson and D. Nitzsche

Figure 1.2 : Yields on corporate bonds

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14

T-Bills AAA AAA AAA BBB JunkBonds

6% 6.07% 6.23% 6.25%7.2%

12% +

Increasing risk

© K. Cuthbertson and D. Nitzsche

Figure 1.4 : Simplified balance sheet

(1) Current Assets (e.g. inventories, receivables)

(2) Fixed Assets(2a) Tangibles (e.g. plant and machinery)(2b) Intangibles (e.g. goodwill)

(1) Liabilities (e.g. accounts payable)

(2) Long-Term debt (e.g. bank loans, bonds outstanding)

(3) Shareholder equity (e.g. ordinary and preference shares)

Total Liabilities= 1 + 2 + 3

Total Assets= 1 + 2a + 2b

Note that net working capital = current assets - current liabilities

© K. Cuthbertson and D. Nitzsche

Figure 1.5 : US industrial sectors

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Entertainment Industry

Oil Industry

Financial Industry

Chemical Industry

Automobile Industry

© K. Cuthbertson and D. Nitzsche

Summary Statistics :(Jan. 95 to Sept. 00)

S&P500 NasdaqMean 1.76% 3.41%Std. dev. 3.94% 7.56%

Correlation : 0.6382(monthly data)

Figure 1.6 : US stock market (S&P500 and NASDAQ)

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Nasdaq

S&P500

© K. Cuthbertson and D. Nitzsche

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Hang Seng

Nikkei

S&P

Dax

FTSE

Figure 1.7 : ‘Local currency’ stock indices

© K. Cuthbertson and D. Nitzsche

0

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$ per Malaysian Ringgit

$ per Indonesian Ruphia

$ per Thai Baht

Figure 1.8 : Asian crises : spot FX rates

© K. Cuthbertson and D. Nitzsche

Figure 1.9 : Types of traders

• Arbitrageurs : Keep price = ‘fundamental

value’

• Hedgers : Offset risk that they currently

face

• Speculators : Take ‘open’ positions to make

a profit