商业银行管理全套配套课件英文PPT教师手册习题习题答案 Chap010.ppt 38页

ChapterTenTheInvestmentFunctioninFinancial-ServicesManagement KeyTopicsNatureandFunctionsofInvestmentsInvestmentSecuritiesAvailable:AdvantagesandDisadvantagesMeasuringExpectedReturnsTaxes,Credit,andInterest-RateRisksLiquidity,Prepayment,andOtherRisksInvestmentMaturityStrategiesMaturityManagementTools IntroductionDepositoryinstitutionsdevoteasignificantportionoftheirassetportfoliostoinvestmentsinsecuritiesNonbankfinancial-serviceproviderssuchasinsurancecompanies,pensionfunds,andmutualfundsoftendevoteanevenbiggerportionoftheirassetstoinvestmentsecuritiesInvestmentsperformanumberofvitalfunctionsintheassetportfoliosoffinancialfirms,providingincome,liquidity,diversification,andshelterforatleastaportionofearningsfromtaxationInvestmentsalsotendtostabilizeearnings,providingsupplementalincomewhenothersourcesofrevenueareindecline EXHIBIT10–1Investments:TheCrossroadsAccountonaDepositoryInstitution’sBalanceSheet InvestmentInstrumentsAvailabletoFinancialFirmsThenumberoffinancialinstrumentsavailableforfinancialinstitutionstoaddtotheirportfoliosisbothlargeandgrowingEachfinancialinstrumenthasdifferentcharacteristicswithregardtoexpectedyields,risk,sensitivitytoinflation,andsensitivitytoshiftinggovernmentpoliciesandeconomicconditionsItisusefultodividethemintotwobroadgroupsMoneymarketinstrumentsReachmaturitywithinoneyearandarenotedfortheirlowriskandreadymarketabilityCapitalmarketinstrumentsHaveremainingmaturitiesbeyondoneyearandaregenerallynotedfortheirhigherexpectedrateofreturnandcapitalgainspotential InvestmentInstrumentsAvailabletoFinancialFirms(continued)InvestmentsecurityportfolioshelptoStabilizethebank’sincomeOffsetcreditriskexposureProvidegeographicdiversificationProvidebackupsourceofliquidityReducetaxexposureServeascollateralHedgeagainstinterestrateriskProvideflexibilityDressupabank’sbalancesheetSomeauthoritiesrefertoinvestmentsasthecrossroadsaccount InvestmentInstrumentsAvailabletoFinancialFirms(continued)FederalregulationsstresstheneedforeveryregulatedinstitutiontodevelopawritteninvestmentpolicygivingspecificguidelinesonThequalityordegreeofdefaultriskexposuretheinstitutioniswillingtoacceptThedesiredmaturityrangeanddegreeofmarketabilitysoughtforallsecuritiespurchasedThegoalssoughtforitsinvestmentportfolioThedegreeofportfoliodiversificationtoreducerisktheinstitutionwishestoachieve PopularMoneyMarketInvestmentInstrumentsTreasuryBillsShort-TermTreasuryNotesandBondsFederalAgencySecuritiesCertificatesofDepositEurocurrencyDepositsBanker’sAcceptancesCommercialPaperShort-TermMunicipalObligations PopularCapitalMarketInvestmentInstrumentsTreasuryNotesandBondsMunicipalNotesandBondsCorporateNotesandBonds InvestmentInstrumentsDevelopedMoreRecentlyStructuredNotesArosefromsecuritydealerswhoassembledpoolsoffederalagencysecuritiesandofferedinvestmentsofficersapackagedinvestmentwhoseinterestyieldcouldberesetperiodicallybasedonwhathappenedtoareferenceinterestrateSecuritizedAssetsPass-throughsecuritiesCMOsMortgage-backedbondsGuaranteesfromgovernmentagencies;higheraverageyields;lackofgood-qualityassets;superiorliquidityStrippedSecuritiesPrincipal-Only(PO)andInterest-Only(IO)securities InvestmentSecuritiesHeldbyBanksJustafewtypesofsecuritiesdominatebankinvestmentportfoliosU.S.government(especiallyTreasury)securitiesObligationsofvariousfederalagenciessuchastheFederalNationalMortgageAssociation(FNMA),theFederalHomeLoanMortgageCorporation(FHLMC),andtheGovernmentNationalMortgageAssociation(GNMA),especiallyintheformofmortgage-backedsecuritiesStateandlocalgovernmentobligations(municipals)Nonmortgage-relatedasset-backedsecurities(suchasobligationsbackedbycreditcardandautomobileloans)Equities(commonandpreferredstock) TABLE10–3InvestmentSecuritiesHeldbyFDIC-InsuredCommercialBanks,2010 FactorsAffectingChoiceofInvestmentSecuritiesTheprincipalfactorsbearingonwhichinvestmentsarechosenincludeExpectedrateofreturnTaxexposureInterestrateriskCreditordefaultriskBusinessriskLiquidityriskCallriskPrepaymentriskInflationriskPledgingrequirements FactorsAffectingChoiceofInvestmentSecurities(continued)ExpectedRateofReturnYieldtoMaturity(YTM)versusHoldingPeriodYield(HPY)ExampleAninvestmentsofficerisconsideringpurchasinga$1,000par-valueTreasurynotethatpromisesan8percentcouponrateandmaturesinfiveyearswithacurrentof$900 FactorsAffectingChoiceofInvestmentSecurities(continued)TaxExposureThetaxstatusofstateandlocalgovernmentbondsBankqualifiedbondsTaxswappingtoolTheportfolioshiftingtool FactorsAffectingChoiceofInvestmentSecurities(continued)TaxExposureToevaluatetheattractivenessofmunicipals,financialfirmscalculatethenetafter-taxreturnsand/orthetax-equivalentyieldstoenablecomparisonswithotherinvestmentalternativesThenetafter-taxreturnofbank-qualifiedmunicipalsiscalculatedas FactorsAffectingChoiceofInvestmentSecurities(continued)TaxExposureThetaxadvantageofaqualifiedbondisdeterminedas FactorsAffectingChoiceofInvestmentSecurities(continued)TaxExposureSupposeabankpurchasesabank-qualifiedbondfromasmallcity,county,orschooldistrictandthebondcarriesanominalgrossrateofreturnof7percentThebankhadtoborrowthefundsneededtomakethispurchaseataninterestrateof6.5percentandisinthe35percenttaxbracketThebond’snetannualafter-taxreturn(afterallfundingcostsandtaxes)mustbe: FactorsAffectingChoiceofInvestmentSecurities(continued)TaxExposureInyearswhenloanrevenuesarehigh,itmaybebeneficialtoengageintaxswappingInataxswap,thelendinginstitutionsellslower-yieldingsecuritiesatalossinordertoreduceitscurrenttaxableincome,whilesimultaneouslypurchasingnewhigher-yieldingsecuritiesinordertoboostfuturereturnsLendinginstitutionsalsodoagreatdealofportfolioshiftingintheirholdingsofinvestmentsecurities,withbothtaxesandhigherreturnsinmind FactorsAffectingChoiceofInvestmentSecurities(continued)InterestRateRiskRisinginterestrateslowersthevalueofpreviouslyissuedbondsLongest–termbondssufferthegreatestLossesManyinterestraterisktoolsincludingfutures,options,andswapsexisttoday FactorsAffectingChoiceofInvestmentSecurities(continued)CreditorDefaultRiskTheriskthatthesecurityissuermaydefaultontheprincipalorinterestowedThreemajorcreditratingsagenciesMoody’sStandard&Poor’sFitch’sRatingService TABLE10–4DefaultRiskRatingsonMarketableInvestmentSecurities(includinglong-termcorporateobligations) FactorsAffectingChoiceofInvestmentSecurities(continued)BusinessRiskRiskthattheeconomyofthemarketareathefinancialinstitutionservesmayslowdownSecurityportfoliocanoffsetthisriskSecuritiescanbepurchasedfromoutsidethemarketareaservedLiquidityRiskCanasecuritybeconvertedintocashquicklyandeasilywithoutsignificantlossinvalue?Akeyissue–thebreadthanddepthofasecurity’sresalemarket FactorsAffectingChoiceofInvestmentSecurities(continued)CallRiskManycorporationsandsomegovernmentsthatissuesecuritiesreservetherighttocallininstrumentsinadvanceofmaturityandpaythemoffBecausesuchcallsusuallytakeplacewhenmarketinterestrateshavedeclined(andtheborrowercangetlowerinterestcosts),thefinancialfirminvestingincallablesecuritiesrunstheriskofanearningslossbecauseitmustreinvestitsrecoveredfundsatlowerinterestrates FactorsAffectingChoiceofInvestmentSecurities(continued)PrepaymentRiskAformofriskspecifictoasset-backedsecuritiesThisformofriskarisesbecausetherealizedinterestandprincipalpaymentsfromapoolofsecuritizedloansmaybequitedifferentfromthecashflowsexpectedoriginallyVariationsincashflowtoholdersofthesecuritiesbackedbytheseloanscanarisefromLoanrefinancingsTurnoveroftheassetsbehindtheloans FactorsAffectingChoiceofInvestmentSecurities(continued)PrepaymentRiskThismeansthatthemarketvalueofaloan-backedsecuritydependsnotonlyuponthepromisedcashflowsitwillgenerate,butalsoontheprojectedprepaymentsandloandefaultsthatoccur FactorsAffectingChoiceofInvestmentSecurities(continued)InflationRiskPurchasingpowerfromasecurityorloanmaybeerodedbyrisingpricesRecentlydevelopedinflationriskhedge–TreasuryInflationProtectedSecurities(TIPS)BothcouponpaymentsandprincipaladjustedannuallyforinflationbasedonConsumerPriceIndexTIPSdonotprotectinvestorsfromalltheeffectsofinflation,suchasmovingintohighertaxbracketsCarrymarketrisklikeregularbondsTendtobelessliquid FactorsAffectingChoiceofInvestmentSecurities(continued)PledgingRequirementsDepositoryinstitutionsintheUnitedStatescannotacceptdepositsfromfederal,state,andlocalgovernmentsunlesstheypostcollateralacceptabletothesegovernmentalunitsStateandlocalgovernmentdepositpledgingrequirementsdifferwidelyfromstatetostate,thoughmostallowacombinationoffederalandmunicipalsecuritiestomeetgovernmentpledgingrequirementsIfafinancialinstitutionusesrepurchaseagreements(RPs)toraisemoney,itmustpledgesomeofitssecurities(usuallyTreasuryandfederalagencyissues)ascollateralinordertoreceivefundsatthelowestRPrate InvestmentMaturityStrategiesTheLadderorSpaced-MaturityPolicyTheFront-EndLoadMaturityPolicyTheBack-EndLoadMaturityPolicyTheBarbellStrategyTheRateExpectationApproach EXHIBIT10–2AlternativeMaturityStrategiesforManagingInvestmentPortfolios EXHIBIT10–2AlternativeMaturityStrategiesforManagingInvestmentPortfolios EXHIBIT10–2AlternativeMaturityStrategiesforManagingInvestmentPortfolios EXHIBIT10–3AdditionalMaturityStrategiesforManagingInvestmentPortfolios EXHIBIT10–3AdditionalMaturityStrategiesforManagingInvestmentPortfolios MaturityManagementToolsTheYieldCurvePictureofhowmarketinterestratesdifferacrossvariousmaturitiesConstructedmosteasilywithTreasurysecuritiesProvidesinformationaboutunderandoverpricedsecuritiesProvidesinformationabouttherisk-returntrade-offDurationPresentvalueweightedaveragematurityofthecashflowsCanbeusedtoinsulatethesecuritiesfrominterestratechanges EXHIBIT10–4TheYieldCurve MaturityManagementTools(continued)ImmunizationDurationalsosuggestsawaytominimizedamagetoaninvestinginstitution’searningsthatchangesinmarketinterestratesmaycauseDurationgivestheinvestmentsofficeratooltoreducehisorherinstitution’sexposuretointerestrateriskPortfolioimmunizationisprotectingsecuritiespurchasedfromlossofreturn,nomatterwhichwayinterestratesgo QuickQuizWhydobanksandotherinstitutionschoosetodevoteasignificantportionoftheirassetstoinvestmentsecurities?Whataretheprincipalmoneymarketandcapitalmarketinstrumentsavailabletoinstitutionstoday?Whattypesofinvestmentsecuritiesdobanksseemtopreferthemost?Bysizeofinstitutions?Explain.Ifagovernmentbondisexpectedtomatureintwoyearsandhasacurrentpriceof$950,whatisthebond’sYTMifithasaparvalueof$1000andapromisedcouponrateof10percent?Supposethisbondissoldoneyearafterpurchaseforapriceof$970.Whatwouldthisinvestor’sholdingperiodreturnbe?Howcantheyieldcurveanddurationhelpaninvestmentofficerchoosewhichsecuritiestoacquireorsell?