MERIMeeting du 21 octobre 2014 - Financial Markets and Instruments overview

1

MeetingsMERI

Financial Marketsand Instruments overview

Présenté par

Xin ZHANG – Consultant Finance

21/10/2014

2

Introduction What’s the financial system?

Why do we need this system?

Major financial professional activities

overview

Investment banking

Corporate banking

Retail banking

Corporate finance

Brokerage

Exchange

Clearing House

Financial Statement Presentation Balance Sheet

Income Statement

Cash Flow Statement

Notes

Money Market and Financial Market Primary market

Secondary market

IPO

OTC

Financial Instruments Equity

Fixed Income

Derivatives (Option/Future)

Others (Swap, Forward, Forex, Structured

Bonds)

Conclusion

Summary

3

Introduction

In finance, the financial system is the system that allows the transfer of money

between savers (and investors) and borrowers

What’s the financial system?

4

Introduction

Why do we need this system?

Direct Finance:

Different Markets

5

Introduction

The actors in this system

Marchés financiers organisés:

•Les négociateurs et les compensateurs

•Les régulateurs

Marchés monétaires

•Les différents produits (les billets de trésorerie, les certificats de

dépôt, les bons à moyen terme négociables, les obligations

assimilables du trésor, les bons du trésor à intérêt annuel)

Marchés interbancaires et OTC

•Les banques

Les nouveaux acteurs

•Hedge funds

•Private Equity

•Fonds souveraines

•Finance structurée

•Finance islamique

6

Introduction

The products in this system

Les produits négociés au comptant: (cash market)

•Les actions

•Les obligations

•Les ETF/trackers

•Les warrants et certificats

•Les TCN

•Les indices

Les marchés dérivés organisés

Future:

Sur Taux, Obligation, Devise, Matières premières

Option:

Sur action, indices, sur taux, sur matière premières

Les marchés dérivés de gré à gré (95% de volume)

Swap, Forward, CDS, Produit structuré (ABS, MBS, CDO), Option

exotique

7

Major financial professional activities overview

Flow of funds in the organized markets

Investor

Asset Manager

Investor

Investor

Investor

Investor

Asset Manager

Broker

Investment Bank

Exchange

Clearing HouseBroker/Investment Bank

Multi Trading Facilities

8

Major financial professional activities overview

Examples:

Investment Bank/Broker:•Merrill Lynch

•Goldman Sachs

•Morgan Stanley

…

Broker:•LPL Financial

•Ameriprise Financial

•Raymond James Financial services

…

Asset Manager:•BlackRock Inc

•Allianz

•HSBC

•UBS

…

Exchange:•New York Stock Exchange

•Euronext

•London Stock Exchange

•CME

…

Clearing house:•LCH ClearNET

•New York Clearing House

…

9

Major financial professional activities overview

Some Financial Professions

Corporate finance•Accountant

•Cash manager

•Auditor

•CFO

…

Investment banking:•Trader

•Financial analyst

•Saler

•Compliance Officer

•Risk manager

…

Corporate banking:•Credit analyst

•Financial consultant M/A

•Financial consultant IPO

…

10

Marché de capitaux (financial

market):

Marché financier:

•Actions (equity market)

Marché primaire e secondaire

•Obligations (fixed income

market)

Marché primaire e secondaire

Marché Monétaire:

Marché primaire e secondaire

Passif:

Capitaux Propres

Emprunts

bancaires

Emprunts dans le

public

Concours

bancaires

Crédits dans le

publique

Hors bilan

Actif:

Placement en

banque

Placement en

bourse

Placement sur le

marché monétaire

Placement par

intermédiaires

Hors bilan

Marché

interbancaire

Intermédiaire

(SICAV)

Marché à terme

Future

Option

Autres (OTC)

Financial system overview

11

Financial Statement Presentation

Accounting and Financial Analysis

•Balance Sheet

•Income Statement (P&L)

•Cash Flow Statement

•Foot Notes

12

Financial Statement Presentation

Le compte de résultat = P&L = Profit and Loss

collecte l'ensemble des dépenses et des recettes de l'entreprise

Le suivi de trésorerie = Cash flow Statement

collecte l'ensemble des flux d'argent de l'entreprise

Le Bilan = BS = Balance Sheet

collecte l'ensemble des ressources financières ( Capital investi par les

actionnaires, fournisseurs, emprunts bancaires ) et des emplois de ces

ressources ( immobilisations, stock, …)

13

RESSOURCES

CREDIT

FOURNISSEURS

EMPLOIS

IMMOBILISATIONS

STOCK

APPORT = CAPITAL

EMPRUNTS AUPRES

DES BANQUES

CAISSE

Bilan

RESULTAT NET

14

Bilan Simplifié

15

Balance Sheet

16

RESSOURCES

FOURNIS.

CREDIT CLIENTS

EMPLOIS

IMMOBILISATIONS

STOCK

CAPITAL

EMPRUNTS

RESULTAT NETCAISSE

P&L

E.B.I.T

ACHATS

FRAIS GENERAUX

VENTES

IMPOTS

N.I

Bilan et Compte de Résultat

17

Compte de Résultat Simplifié

18

Tableau de flux de trésorerie

19

Markets

Money Market and Financial Market

•Primary market

•Secondary market

•IPO

•OTC

20

Financial Instruments

•Financial Instruments

•Equity

•Fixed Income

•Derivatives (Option/Future)

•Others (Swap, Forward, Forex, Structured Bonds)

21

Equity

Ownership in any asset after all debts associated with that asset are paid off

Security Market Index

Order Presentation

22

Security Market Index

Price Weighted Index: Dow Jones Industrial Average

Market Cap Weighted Index: S&P 500

Equal Weighted Index: MSCI World Equal Weighted Index

23

Financial Order Presentation

Order Type:• Market Order

• Limit Order

• Stop Order

• Stop Limit Order

Time in force (validity):• Day

• Good till day

• Good till cancel

• Immediate or Cancel

• Fill or Kill

24

Fixed Income

Real return rates or periodic income is received at regular intervals at reasonably

predictable levels

25

Fixed Income Presentation

CREDIT AGRICOLE 5.8% 16/04/20 EUR

26

Future

Future:A financial contract obligating the buyer to purchase an asset (or the seller to sell an asset), such as a

physical commodity or a financial instrument, at a predetermined future date and price. Futures contracts

detail the quality and quantity of the underlying asset; they are standardized to facilitate trading on a futures

exchange. Some futures contracts may call for physical delivery of the asset, while others are settled in

cash. The futures markets are characterized by the ability to use very high leverage relative to stock

markets

• Equity Future

• Index Future

• Bond Future

• Interest Rate Future

• Currency Future

…

27

Option

Option:A financial derivative that represents a contract sold by one party (option writer) to another party (option

holder). The contract offers the buyer the right, but not the obligation, to buy (call) or sell (put) a security or

other financial asset at an agreed-upon price (the strike price) during a certain period of time or on a

specific date (exercise date).

European option – an option that may only be exercised on expiration.

American option – an option that may be exercised on any trading day on or before expiry.

Bermudan option – an option that may be exercised only on specified dates on or before expiration.

Asian option – an option whose payoff is determined by the average underlying price over some preset

time period.

Barrier option – any option with the general characteristic that the underlying security's price must pass a

certain level or "barrier" before it can be exercised.

Binary option – An all-or-nothing option that pays the full amount if the underlying security meets the

defined condition on expiration otherwise it expires worthless.

28

Option Payoff

29

Difference between Option/Future

Why do we need these instruments? How?

Practice

30

Financial Instruments

Other Derivatives

•Swap

•Forward

•Forex

•Structured Bonds

31

Conseil et Ingénierie en Banque, Finance et Assurance

Siège Social : 14, rue Gaillon – Paris 2ème

Tél. : 01 44 56 88 10 / Fax : 01 44 56 88 11

www.meritis.fr

Merci de votre

attention