Course Code: 501

Duration: 1 day

Level: Basic

Fee: $795.00

Instructor: Douglas Carroll

CPE Credits: 7

Prerequisite: No Prerequisite Required.

This seminar explores the linkages between capital markets and the real economy. The program is designed to provide participants with a conceptual framework for understanding the mechanisms through which markets reflect and respond to developments in the real economy. The primary focus will be the analysis of markets as discounting mechanisms; the process by which markets try to incorporate new information into market prices.

The session opens with a review of financial markets and global economies over recent decades, highlighting the interaction or business cycles and financial market cycles. This discussion sets up a review of macroeconomic concepts used to quantify and evaluate economic activity; gross domestic product (GDP), inflation and unemployment among others. The balance of the program will investigate the theory and practice of pricing a broad range of financial assets to include fixed income securities, derivatives and equities.

Linkages Between the Real Economy and the Capital Markets

• Capital Markets and the Business Cycle
• Role of the Capital Markets in Functioning of the Economy
  
• Financial Markets as Leading Indicators 
  • Equity Markets 
  • Credit 
  • Spreads 
  • Yield Curve

Economic Policy, the Real Economy and Capital Markets

• Policy Benchmarks
  • Gross Domestic Product (GDP)
  • Unemployment 
  • Inflation 
• Fiscal Policy: Activist Tools Versus Automatic Stabilizers 
• Monetary Policy: The Fed, Interest Rates and Inflation

Fixed Income Securities Pricing and Valuation

• Prices and Yields ? Yield to Maturity Reconsidered
• Yield Curves and Valuing Fixed Income Cash Flows 
• Government Versus Investment Grade Corporate Yield Curve 
• Investment Grade Versus High Yield Bonds

Derivative Instrument Pricing and Valuation

• Futures/Forwards ? Cost of Carry Arbitrage Pricing
• Swaps ? Swap Coupons and Off Market Swap Pricing
  

Equity Securities Analysis and Valuation

• Valuation Models ? Earnings Multiples and Discounted Cash Flows, Dividends or Earnings

Please bring a calculator.

After completing this program, participants should be able to:

•   Discuss the connections between financial market conditions and the business cycle as well as yield curves and equity markets as leading economic indicators
• Explain the use of spot rate curves in the valuation of fixed income securities
• Describe the concepts of real interest rates, expected inflation and credit spreads and their implications for credit market conditions and discount rates for valuing securities 
• Discuss the concept of equity risk premium and discount rates along with their role in equity valuation models
• Describe price/earnings (P/E) ratios and how earnings multiples are used in equity securities valuation
• Identify the primary factors influencing the movement of currency exchange rates
• Describe the role of arbitrage in derivative pricing