Corporate Finance: Principles and Practice

Höfundar: Denzil Watson; Antony Head; Dora Chan (Útgáfa: 10)
Corporate Finance: Principles and Practice

Kaup valmöguleikar

"Comprehensively updated for today’s financial landscape, this new edition places financial decision-making firmly in its real-world context. A major new chapter, 'Emerging Trends in Finance', examines environmental, social and governance (ESG) issues, sustainable finance, and FinTech, showing how these developments are transforming corporate finance practice. Throughout the text, new real-world vignettes bring theory to life by featuring recognisable organisations.

Revised discussions of core financial models connect technical analysis to contemporary ethical, social and political considerations, while an enhanced suite of accompanying resources support effective and engaging teaching. " - Dr Sarah Lindop, Senior Lecturer in Finance, Aberystwyth University Deepen your understanding of corporate finance with this reader-friendly text. Corporate Finance: Principles and Practice, 10th edition, is a comprehensive, practical guide to the field, ideal for students of accounting, business, and finance at undergraduate, postgraduate, and professional levels.

Designed for newcomers to the subject, the book explains essential principles and mathematical techniques step by step, without unnecessary detail, and offers practical examples from well-known companies for a relevant real-world discussion of the topics. End of chapter exercises and review questions, expanded for this edition, support self-study and develop critical thinking. Key features of this edition Coverage of all key topics, mapping closely to requirements set out by professional bodies A new chapter on sustainable finance and financial technology (FinTech) and their impact on financial decision-making Short examples of recognisable businesses throughout the book, such as BP, Ryanair, Deutsche Bank and BlackRock, which connect theory with up-to-date financial hot topics Consideration of how corporate finance models apply in real social, political and business contexts, deepening your ability to interpret financial results Pair this text with MyLab Finance MyLab Finance is the teaching and learning resource available to support this title.

Nánar um bókina

Útgefandi
Pearson International Content
ISBN
9781292486352
Print ISBN
9781292754161
Format
ePub
Útgáfa
10
Höfundar
Denzil Watson; Antony Head; Dora Chan
Tungumál
English
Útgefið
2026-05-12
Prent takmörkun á líftíma
100
Prent takmörkun
2
Afritunar takmörkun
2

Kaflar

  • Front matter
  • Cover
  • Cover
  • Prelims
  • Half title
  • Mission statement
  • Title page
  • Copyright
  • Endorsement
  • About the authors
  • Preface
  • Acknowledgements
  • Chapter 1: The finance function
  • Chapter 1: The finance function
  • Learning Objectives
  • Introduction
  • 1.1 Two key concepts in corporate finance
  • 1.1 Two key concepts in corporate finance
  • 1.1.1 The time value of money
  • 1.1.2 The relationship between risk and return
  • 1.1.3 Compounding and discounting
  • 1.2 The role of the financial manager
  • 1.2 The role of the financial manager
  • 1.3. Corporate objectives
  • 1.3. Corporate objectives
  • 1.3.1 Maximisation of profits
  • 1.3.2 Maximisation of sales
  • 1.3.3 Survival
  • 1.3.4 Social responsibility
  • 1.4 How is shareholder wealth maximised?
  • 1.4 How is shareholder wealth maximised?
  • 1.5 Agency theory
  • 1.5 Agency theory
  • 1.5.1 Why does agency exist?
  • 1.5.2 How does agency manifest within a company?
  • 1.5.3 Dealing with the agency problem between shareholders and managers
  • 1.5.4 Managers’ remunerations
  • 1.5.5 The agency problem between debt holders and shareholders
  • 1.5.6 The influence of institutional investors
  • 1.5.7 The influence of international investors
  • 1.6 Corporate governance
  • 1.6 Corporate governance
  • 1.6.1 Corporate governance in the UK
  • 1.6.2 Corporate governance in the USA
  • 1.7 Conclusion
  • 1.7 Conclusion
  • Key points
  • Self-test questions
  • Multiple-choice questions
  • Questions for review
  • Questions for discussion
  • References
  • Recommended reading
  • Chapter 2: Emerging trends in finance
  • Chapter 2: Emerging trends in Finance
  • Learning Objectives
  • Introduction
  • 2.1 Environmental, social and governance (ESG)
  • 2.1 Environmental, social and governance (ESG)
  • 2.1.1 What is ESG? A very brief history
  • 2.1.2 ESG and ESG-related disclosure in practice
  • 2.1.3 Difficulties associated with ESG
  • 2.2 FinTech
  • 2.2 FinTech
  • 2.2.1 FinTech and financial services
  • 2.2.2 Direct benefits of FinTech for companies
  • 2.3 Conclusion
  • 2.3 Conclusion
  • Key points
  • Self-test questions
  • Multiple-choice questions
  • Questions for review
  • Questions for discussion
  • References
  • Recommended reading
  • Chapter 3: Capital markets, market efficiency and ratio analysis
  • Chapter 3: Capital markets, market efficiency and ratio analysis
  • Learning Objectives
  • Introduction
  • 3.1 Sources of business finance
  • 3.1 Sources of business finance
  • 3.1.1 Internal Finance
  • 3.1.2 External Finance
  • 3.1.3 The balance between internal and external finance
  • 3.2 Capital Markets
  • 3.2 Capital Markets
  • 3.3 Capital market efficiency
  • 3.3 Capital market efficiency
  • 3.3.1 Perfect markets and efficient markets
  • 3.3.2 Different forms of market efficiency
  • 3.3.3 Testing for market efficiency
  • 3.3.4 Implications of the efficient market hypothesis
  • 3.3.5 Technical and fundamental analysis
  • 3.3.6 Anomalies in share price behaviour
  • 3.3.7 Behavioural finance
  • 3.3.8 Summary
  • 3.4 Assessing financial performance
  • 3.4 Assessing financial performance
  • 3.4.1 The need for benchmarks
  • 3.4.2 Categories of ratios
  • 3.4.3 Profitability ratios
  • 3.4.4 Activity ratios
  • 3.4.5 Liquidity ratios
  • 3.4.6 Gearing ratios
  • 3.4.7 Investor ratios
  • 3.4.8 Interpreting the financial ratios of Boater
  • 3.4.9 Problems with ratio analysis
  • 3.4.10 Economic profit and economic value added (EVA®)
  • 3.5 Conclusion
  • 3.5 Conclusion
  • Key points
  • Self-test questions
  • Multiple-choice questions
  • Questions for review
  • Questions for discussion
  • References
  • Recommended reading
  • Chapter 4: Short-term finance and working capital management
  • Chapter 4: Short-term finance and working capital management
  • Learning Objectives
  • Introduction
  • 4.1 The objectives of working capital management
  • 4.1 The objectives of working capital management
  • 4.2 Working capital policies
  • 4.2 Working capital policies
  • 4.2.1 Working capital investment policy
  • 4.2.2 Short-term finance
  • 4.2.3 Financing working capital
  • 4.3 Working capital and the cash conversion cycle
  • 4.3 Working capital and the cash conversion cycle
  • 4.3.1 The cash conversion cycle and working capital needs
  • 4.4 Overtrading
  • 4.4 Overtrading
  • 4.5 Managing inventory
  • 4.5 Managing inventory
  • 4.5.1 The economic order quantity
  • 4.5.2 Buffer inventory and lead times
  • 4.5.3 Just-in-time inventory policies
  • 4.6 Managing cash
  • 4.6 Managing cash
  • 4.6.1 The need for cash
  • 4.6.2 Optimum cash levels
  • 4.6.3 Cash flow problems
  • 4.6.4 Cash budgets
  • 4.6.5 Managing cash flows
  • 4.6.6 Investing surplus cash
  • 4.7 Managing trade receivables
  • 4.7 Managing trade receivables
  • 4.7.1 Credit analysis system
  • 4.7.2 Credit control system
  • 4.7.3 Trade receivables collection system
  • 4.7.4 Insuring against bad debts
  • 4.7.5 Early settlement discounts
  • 4.7.6 Factoring
  • 4.7.7 Invoice discounting
  • 4.8 Working capital and technological advancements
  • 4.8 Working capital and technological advancements
  • 4.8.1 Inventory management
  • 4.8.2 Cash management
  • 4.8.3 Accounts receivable management
  • 4.8.4 Accounts payable management
  • 4.9 Conclusion
  • 4.9 Conclusion
  • Key points
  • Self-test questions
  • Multiple-choice questions
  • Questions for review
  • Questions for discussion
  • References
  • Recommended reading
  • Chapter 5: Long-term finance: Equity finance
  • Chapter 5: Long-term finance: Equity finance
  • Learning Objectives
  • Introduction
  • 5.1 Equity finance
  • 5.1 Equity finance
  • 5.1.1 The rights of ordinary shareholders
  • 5.1.2 Equity finance, risk and return
  • 5.2 The Stock Exchange
  • 5.2 The Stock Exchange
  • 5.2.1 The new equity issues market
  • 5.2.2 New issue methods
  • 5.2.3 Listing regulations
  • 5.2.4 Relative importance of placing and public offer
  • 5.2.5 Underwriting
  • 5.2.6 Advantages of obtaining a stock exchange quotation
  • 5.2.7 Disadvantages of obtaining a stock market quotation
  • 5.3 Rights issues
  • 5.3 Rights issues
  • 5.3.1 The theoretical ex-rights price
  • 5.3.2 The value of the rights
  • 5.3.3 Rights issues and shareholder wealth
  • 5.3.4 Market price after a rights issue
  • 5.3.5 Underwriting and deep discount rights issues
  • 5.4 Scrip issues, share splits, scrip dividends and share repurchases
  • 5.4 Scrip issues, share splits, scrip dividends and share repurchases
  • 5.4.1 Scrip issues and share splits
  • 5.4.2 Scrip dividends
  • 5.4.3 Share repurchases
  • 5.5 Preference shares
  • 5.5 Preference shares
  • 5.5.1 Variable rate preference shares
  • 5.5.2 Convertible preference shares
  • 5.5.3 The popularity of preference shares
  • 5.5.4 The advantages and disadvantages of preference shares
  • 5.6 Conclusion
  • 5.6 Conclusion
  • Key points
  • Self-test questions
  • Multiple-choice questions
  • Questions for review
  • Questions for discussion
  • References
  • Recommended reading
  • Chapter 6: Long-term finance: Debt finance, hybrid finance and leasing
  • Chapter 6: Long-term finance: Debt finance, hybrid finance and leasing
  • Learning Objectives
  • Introduction
  • 6.1 Bonds, loan notes, loan stock and debentures
  • 6.1 Bonds, loan notes, loan stock and debentures
  • 6.1.1 Covenants
  • 6.1.2 Redemption and refinancing
  • 6.1.3 Floating interest rates
  • 6.1.4 Bond ratings
  • 6.1.5 Deep discount and zero coupon bonds
  • 6.1.6 New issues of bonds
  • 6.2 Bank and institutional debt
  • 6.2 Bank and institutional debt
  • 6.3 International debt finance
  • 6.3 International debt finance
  • 6.3.1 Eurobonds
  • 6.4 Convertible bonds
  • 6.4 Convertible bonds
  • 6.4.1 The attractions of convertible bonds for companies
  • 6.4.2 The attractions of convertible bonds to investors
  • 6.5 Warrants
  • 6.5 Warrants
  • 6.6 Valuing fixed interest bonds
  • 6.6 Valuing fixed interest bonds
  • 6.6.1 Irredeemable bonds
  • 6.6.2 Redeemable bonds
  • 6.7 Valuing convertible bonds
  • 6.7 Valuing convertible bonds
  • 6.7.1 Conversion value
  • 6.7.2 Market value
  • 6.7.3 Factors influencing the market value of a convertible bond
  • 6.8 Leasing
  • 6.8 Leasing
  • 6.8.1 Reporting leases
  • 6.8.2 Tax reasons for leasing
  • 6.8.3 Other reasons for leasing
  • 6.8.4 Evaluating leasing as a source of finance
  • 6.8.5 The distribution of financial benefits
  • 6.9 Evaluating the financial effects of financing choices
  • 6.9 Evaluating the financial effects of financing choices
  • 6.10 Conclusion
  • 6.10 Conclusion
  • Key points
  • Self-test questions
  • Multiple-choice questions
  • Questions for review
  • Questions for discussion
  • References
  • Recommended reading
  • Chapter 7: An overview of investment appraisal methods
  • Chapter 7: An overview of investment appraisal methods
  • Learning Objectives
  • Introduction
  • 7.1 The payback method
  • 7.1 The payback method
  • 7.1.1 Example of the payback method
  • 7.1.2 The advantages of the payback method
  • 7.1.3 The disadvantages of the payback method
  • 7.2 The return on capital employed method
  • 7.2 The return on capital employed method
  • 7.2.1 Advantages of the return on capital employed method
  • 7.2.2 Disadvantages of the return on capital employed method
  • 7.3 The net present value method
  • 7.3 The net present value method
  • 7.3.1 Advantages of the net present value method
  • 7.3.2 Disadvantages of the net present value method
  • 7.4 The internal rate of return method
  • 7.4 The internal rate of return method
  • 7.5 Comparing the NPV and IRR methods
  • 7.5 Comparing the NPV and IRR methods
  • 7.5.1 Mutually exclusive projects
  • 7.5.2 Non-conventional cash flows
  • 7.5.3 Changes in the discount rate
  • 7.5.4 Reinvestment assumptions
  • 7.5.5 The superiority of the net present value method
  • 7.6 The profitability index and capital rationing
  • 7.6 The profitability index and capital rationing
  • 7.6.1 Hard and soft capital rationing
  • 7.6.2 Single-period capital rationing
  • 7.6.3 Multiple-period capital rationing
  • 7.7 The discounted payback method
  • 7.7 The discounted payback method
  • 7.8 Conclusion
  • 7.8 Conclusion
  • Key points
  • Self-test questions
  • Multiple-choice questions
  • Questions for review
  • Questions for discussion
  • References
  • Recommended reading
  • Chapter 8: Investment appraisal: Applications and risk
  • Chapter 8: Investment appraisal: applications and risk
  • Learning Objectives
  • Introduction
  • 8.1 Relevant project cash flows
  • 8.1 Relevant project cash flows
  • 8.1.1 Sunk costs
  • 8.1.2 Apportioned fixed costs
  • 8.1.3 Opportunity costs
  • 8.1.4 Incremental working capital
  • 8.2 Taxation and capital investment decisions
  • 8.2 Taxation and capital investment decisions
  • 8.2.1 Tax-allowable depreciation
  • 8.2.2 Tax allowable costs
  • 8.2.3 Are interest payments a relevant cash flow?
  • 8.2.4 The timing of tax liabilities and benefits
  • 8.2.5 Can taxation be ignored?
  • 8.3 Inflation and capital investment decisions
  • 8.3 Inflation and capital investment decisions
  • 8.3.1 Real and nominal costs of capital
  • 8.3.2 General and specific inflation
  • 8.3.3 Inflation and working capital
  • 8.3.4 The golden rule for dealing with inflation in investment appraisal
  • 8.4 Investment appraisal and risk
  • 8.4 Investment appraisal and risk
  • 8.4.1 Sensitivity analysis
  • 8.4.2 Payback
  • 8.4.3 Conservative forecasts
  • 8.4.4 Risk-adjusted discount rates
  • 8.4.5 Probability analysis and expected net present value
  • 8.4.6 Simulation models
  • 8.5 Appraisal of foreign direct investment
  • 8.5 Appraisal of foreign direct investment
  • 8.5.1 The distinctive features of foreign direct investment
  • 8.5.2 Methods of evaluating foreign direct investment
  • 8.5.3 Evaluation of foreign direct investment at local level
  • 8.5.4 Evaluation of foreign direct investment at parent company level
  • 8.5.5 Taxation and foreign direct investment
  • 8.6 Empirical investigations of investment appraisal
  • 8.6 Empirical investigations of investment appraisal
  • 8.6.1 Investment appraisal techniques used
  • 8.6.2 The treatment of inflation
  • 8.6.3 Risk analysis
  • 8.6.4 Foreign direct investment
  • 8.6.5 Conclusions of empirical investigations
  • 8.7 Conclusion
  • 8.7 Conclusion
  • Key points
  • Self-test questions
  • Multiple-choice questions
  • Questions for review
  • Questions for discussion
  • References
  • Recommended reading
  • Chapter 9: Portfolio theory and the capital asset pricing model
  • Chapter 9: Portfolio theory and the capital asset pricing model
  • Learning Objectives
  • Introduction
  • 9.1 The measurement of risk
  • 9.1 The measurement of risk
  • 9.1.1 Calculating risk and return using probabilities
  • 9.1.2 Calculating risk and return using historical data
  • 9.2 The concept of diversification
  • 9.2 The concept of diversification
  • 9.2.1 Diversifying unsystematic risk: At company level or investor level?
  • 9.2.2 Diversifying unsystematic risk using a two-share portfolio
  • 9.2.3 Diversifying unsystematic risk using a three-share portfolio
  • 9.3 Investor attitudes to risk
  • 9.3 Investor attitudes to risk
  • 9.4 Markowitz’s portfolio theory
  • 9.4 Markowitz’s portfolio theory
  • 9.4.1 Problems with the practical application of portfolio theory
  • 9.5 Introduction to the capital asset pricing model
  • 9.5 Introduction to the capital asset pricing model
  • 9.6 Using the CAPM to value shares
  • 9.6 Using the CAPM to value shares
  • 9.6.1 The meaning and calculation of beta
  • 9.6.2 Determining the risk-free rate and the return of the market
  • 9.6.3 Using the CAPM: A numerical example
  • 9.6.4 Summary of the implications of the CAPM
  • 9.7 Empirical tests of the CAPM
  • 9.7 Empirical tests of the CAPM
  • 9.7.1 Tests of the stability of beta
  • 9.7.2 Tests of the security market line
  • 9.8 Conclusion
  • 9.8 Conclusion
  • Key points
  • Self-test questions
  • Multiple-choice questions
  • Questions for review
  • Questions for discussion
  • References
  • Recommended reading
  • Chapter 10: The cost of capital and capital structure
  • Chapter 10: The cost of capital and capital structure
  • Learning Objectives
  • Introduction
  • 10.1 Calculating the cost of individual sources of finance
  • 10.1 Calculating the cost of individual sources of finance
  • 10.1.1 Ordinary shares
  • 10.1.2 Preference shares
  • 10.1.3 Bonds and convertibles
  • 10.1.4 Bank borrowings
  • 10.1.5 The relationship between the costs of different sources of finance
  • 10.2 Calculating the weighted average cost of capital
  • 10.2 Calculating the weighted average cost of capital
  • 10.2.1 Market value weightings or book value weightings?
  • 10.3 Average and marginal cost of capital
  • 10.3 Average and marginal cost of capital
  • 10.4 The CAPM and investment appraisal
  • 10.4 The CAPM and investment appraisal
  • 10.4.1 Equity betas and asset betas
  • 10.4.2 Using the CAPM to calculate a project’s discount rate
  • 10.4.3 The benefits of using the CAPM instead of the WACC
  • 10.4.4 Problems using the CAPM in investment appraisal
  • 10.4.5 Splitting the cost of equity into its determinants
  • 10.5 Practical problems with calculating WACC
  • 10.5 Practical problems with calculating WACC
  • 10.5.1 Calculating the cost of sources of finance
  • 10.5.2 Which sources of finance should be included in the WACC?
  • 10.5.3 Problems associated with weighting the sources
  • 10.5.4 WACC is not constant
  • 10.6 WACC in the real world
  • 10.6 WACC in the real world
  • 10.7 The cost of capital for foreign direct investment
  • 10.7 The cost of capital for foreign direct investment
  • 10.7.1 The international financing decision
  • 10.7.2 Factors influencing the choice and mix of finance
  • 10.8 Gearing: Its measurement and significance
  • 10.8 Gearing: Its measurement and significance
  • 10.8.1 Increased volatility of equity returns
  • 10.8.2 Increased possibility of bankruptcy
  • 10.8.3 Reduced credibility on the stock exchange
  • 10.8.4 The encouragement of short-termism
  • 10.9 The concept of an optimal capital structure
  • 10.9 The concept of an optimal capital structure
  • 10.9.1 Gearing and the required rate of return
  • 10.10 The traditional approach to capital structure
  • 10.10 The traditional approach to capital structure
  • 10.11 Miller and Modigliani (I): Net income approach
  • 10.11 Miller and Modigliani (I): Net income approach
  • 10.11.1 The arbitrage approach to capital structure
  • 10.12 Miller and Modigliani (II): Corporate tax
  • 10.12 Miller and Modigliani (II): Corporate tax
  • 10.13 Market imperfections
  • 10.13 Market imperfections
  • 10.13.1 Bankruptcy costs
  • 10.13.2 Agency costs
  • 10.13.3 Tax exhaustion
  • 10.14 Miller and personal taxation
  • 10.14 Miller and personal taxation
  • 10.15 Pecking order theory
  • 10.15 Pecking order theory
  • 10.16 Conclusion: Does an optimal capital structure exist?
  • 10.16 Conclusion: Does an optimal capital structure exist?
  • Key points
  • Self-test questions
  • Multiple-choice questions
  • Questions for review
  • Questions for discussion
  • References
  • Recommended reading
  • Chapter 11: Dividend policy
  • Chapter 11: Dividend policy
  • Learning Objectives
  • Introduction
  • 11.1 Dividends: Operational and practical issues
  • 11.1 Dividends: Operational and practical issues
  • 11.1.1 Legal constraints
  • 11.1.2 Liquidity
  • 11.1.3 Interest payment obligations
  • 11.1.4 Investment opportunities
  • 11.2 The effect of dividends on shareholder wealth
  • 11.2 The effect of dividends on shareholder wealth
  • 11.3 Dividend irrelevance
  • 11.3 Dividend irrelevance
  • 11.4 Dividend relevance
  • 11.4 Dividend relevance
  • 11.4.1 Dividends are signals to investors
  • 11.4.2 The clientele effect
  • 11.4.3 The dividend growth model
  • 11.5 Dividend relevance or irrelevance?
  • 11.5 Dividend relevance or irrelevance?
  • 11.6 Dividend policies
  • 11.6 Dividend policies
  • 11.6.1 Fixed percentage payout ratio policy
  • 11.6.2 Zero-dividend policy
  • 11.6.3 Constant or steadily increasing dividend
  • 11.6.4 Dividend policies in practice
  • 11.7 Alternatives to cash dividends
  • 11.7 Alternatives to cash dividends
  • 11.7.1 Scrip dividends
  • 11.7.2 Share repurchases
  • 11.7.3 Special dividends
  • 11.7.4 Non-pecuniary benefits
  • 11.8 Empirical evidence on dividend policy
  • 11.8 Empirical evidence on dividend policy
  • 11.9 Conclusion
  • 11.9 Conclusion
  • Key points
  • Self-test questions
  • Multiple-choice questions
  • Questions for review
  • Questions for discussion
  • References
  • Recommended reading
  • Chapter 12: Mergers and acquisitions
  • Chapter 12: Mergers and acquisitions
  • Learning Objectives
  • Introduction
  • 12.1 The terminology of mergers and acquisitions
  • 12.1 The terminology of mergers and acquisitions
  • 12.2 Justifications for acquisitions
  • 12.2 Justifications for acquisitions
  • 12.2.1 Economic justifications
  • 12.2.2 Financial justifications
  • 12.2.3 Managerial motives
  • 12.2.4 The case against acquisition
  • 12.3 Trends in takeover activity
  • 12.3 Trends in takeover activity
  • 12.4 Target company valuation
  • 12.4 Target company valuation
  • 12.4.1 Stock market valuation
  • 12.4.2 Asset-based valuation methods
  • 12.4.3 Income-based valuation methods
  • 12.4.4 Summary of valuation methods
  • 12.5 The financing of acquisitions
  • 12.5 The financing of acquisitions
  • 12.5.1 Cash offers
  • 12.5.2 Share-for-share offers
  • 12.5.3 Vendor placings and vendor rights issues
  • 12.5.4 Security packages
  • 12.5.5 Mixed bids
  • 12.6 Strategic and tactical issues
  • 12.6 Strategic and tactical issues
  • 12.6.1 Merger regulation and control
  • 12.6.2 The bidding process
  • 12.6.3 Bid defences
  • 12.7 Divestment
  • 12.7 Divestment
  • 12.7.1 Reasons for divestment
  • 12.7.2 Divestment strategies
  • 12.7.3 Management buyouts
  • 12.8 Private equity
  • 12.8 Private equity
  • 12.9 Empirical research on acquisitions
  • 12.9 Empirical research on acquisitions
  • 12.9.1 The economy
  • 12.9.2 The shareholders of the companies involved
  • 12.9.3 Managers and employees of acquiring and target companies
  • 12.9.4 Financial institutions
  • 12.9.5 Summary of research on acquisitions
  • 12.10 Conclusion
  • 12.10 Conclusion
  • Key points
  • Self-test questions
  • Multiple-choice questions
  • Questions for review
  • Questions for discussion
  • References
  • Recommended reading
  • Chapter 13: Risk management
  • Chapter 13: Risk management
  • Learning Objectives
  • Introduction
  • 13.1 Interest and exchange rate risk
  • 13.1 Interest and exchange rate risk
  • 13.1.1 Interest rate risk
  • 13.1.2 Spot and forward rates
  • 13.1.3 What is meant by exchange rate risk?
  • 13.2 Internal risk management
  • 13.2 Internal risk management
  • 13.2.1 Internal management of interest rate risk
  • 13.2.2 Internal management of exchange rate risk
  • 13.3 External risk management
  • 13.3 External risk management
  • 13.3.1 Hedging using forward contracts
  • 13.3.2 Hedging using the money markets and eurocurrency markets
  • 13.4 Futures contracts
  • 13.4 Futures contracts
  • 13.4.1 Using futures contracts to hedge interest rate risk
  • 13.4.2 Using futures contracts to hedge exchange rate risk
  • 13.4.3 Advantages and disadvantages of using futures to hedge risk
  • 13.5 Options
  • 13.5 Options
  • 13.5.1 Over-the-counter options
  • 13.5.2 Traded options
  • 13.5.3 Using traded options to hedge interest rate risk
  • 13.5.4 Using traded options to hedge exchange rate risk
  • 13.5.5 Factors affecting the price of traded options
  • 13.5.6 Advantages and disadvantages of hedging with options
  • 13.6 Swaps
  • 13.6 Swaps
  • 13.6.1 Interest rate swaps
  • 13.6.2 Currency swaps
  • 13.6.3 Swaptions
  • 13.6.4 Advantages and disadvantages of hedging with swaps
  • 13.7 Issues in interest and exchange risk management
  • 13.7 Issues in interest and exchange risk management
  • 13.7.1 The need for a risk management strategy
  • 13.7.2 The pros of risk management
  • 13.7.3 The cons of risk management
  • 13.7.4 Managing the use of derivatives
  • 13.8 Political risk
  • 13.8 Political risk
  • 13.8.1 Assessment of political risk
  • 13.8.2 Policies to manage political risk
  • 13.9 Conclusion
  • 13.9 Conclusion
  • Key points
  • Self-test questions
  • Multiple-choice questions
  • Questions for review
  • Questions for discussion
  • References
  • Recommended reading
  • Answers to self-test questions
  • Answers to self-test questions
  • Chapter 1
  • Chapter 2
  • Chapter 3
  • Chapter 4
  • Chapter 5
  • Chapter 6
  • Chapter 7
  • Chapter 8
  • Chapter 9
  • Chapter 10
  • Chapter 11
  • Chapter 12
  • Chapter 13
  • Answers to multiple-choice questions
  • Answers to multiple-choice questions
  • Chapter 1
  • Chapter 2
  • Chapter 3
  • Chapter 4
  • Chapter 5
  • Chapter 6
  • Chapter 7
  • Chapter 8
  • Chapter 9
  • Chapter 10
  • Chapter 11
  • Chapter 12
  • Chapter 13
  • Present value tables
  • Present value tables
  • Table of present value factors
  • Table of cumulative present value factors
  • Key terms
  • Key terms
  • Glossary