1 chapter 1 investment banking activities. 2chapter 1 a. investment banking activities investment...
TRANSCRIPT
![Page 1: 1 Chapter 1 Investment Banking Activities. 2Chapter 1 A. Investment Banking Activities Investment Bank Revenue-Generating Activities Support Activities](https://reader031.vdocuments.us/reader031/viewer/2022032015/56649cb15503460f94975f44/html5/thumbnails/1.jpg)
1
Chapter 1
Investment Banking Activities
![Page 2: 1 Chapter 1 Investment Banking Activities. 2Chapter 1 A. Investment Banking Activities Investment Bank Revenue-Generating Activities Support Activities](https://reader031.vdocuments.us/reader031/viewer/2022032015/56649cb15503460f94975f44/html5/thumbnails/2.jpg)
2Chapter 1
A. Investment Banking Activities
Investment Bank
Revenue-Generating Activities Support ActivitiesPrimary market making•Corporate finance•Municipal finance•Treasury and agency finance
Clearing
Secondary market making•Dealer Activity•Brokerage activities
Internal finance(funding)
Information services
Research
Trading •Speculation •Arbitrage
Corporate Restructuring•Expansion•Contraction•Ownership and control
Financial engineering•Zero coupon securities•Mortgage-backed securities•Asset-backed securities•Derivative products
Other revenue-generating activities•Advisory services•Investment Management•Merchant banking•Venture capital•Consulting
![Page 3: 1 Chapter 1 Investment Banking Activities. 2Chapter 1 A. Investment Banking Activities Investment Bank Revenue-Generating Activities Support Activities](https://reader031.vdocuments.us/reader031/viewer/2022032015/56649cb15503460f94975f44/html5/thumbnails/3.jpg)
3Chapter 1
B. Investment Banking v.s. Commercial Banking
The Glass-Steagall Act, 1933 Gramm-Leach-Bliley Act, 1999
Banking Securities Insurance
Fed funds market vs. Repo market
![Page 4: 1 Chapter 1 Investment Banking Activities. 2Chapter 1 A. Investment Banking Activities Investment Bank Revenue-Generating Activities Support Activities](https://reader031.vdocuments.us/reader031/viewer/2022032015/56649cb15503460f94975f44/html5/thumbnails/4.jpg)
4Chapter 1
C. Investment Bankers Oligopoly
U.S. Firms Merrill Lynch, Pierce, Fenner & Smith Inc. (Bank of America) Citigroup Salomon Smith Barney(SSB)
Inc. Lehman Brothers. (Chapter 11) Goldman Sachs & Co. Morgan Stanley Dean Witter.
![Page 5: 1 Chapter 1 Investment Banking Activities. 2Chapter 1 A. Investment Banking Activities Investment Bank Revenue-Generating Activities Support Activities](https://reader031.vdocuments.us/reader031/viewer/2022032015/56649cb15503460f94975f44/html5/thumbnails/5.jpg)
5Chapter 1
C. Investment Bankers Oligopoly
Euro Firms UBS Warburg Credit Swissie Deutsche Bank Abn Amro (RBS) Barclays
![Page 6: 1 Chapter 1 Investment Banking Activities. 2Chapter 1 A. Investment Banking Activities Investment Bank Revenue-Generating Activities Support Activities](https://reader031.vdocuments.us/reader031/viewer/2022032015/56649cb15503460f94975f44/html5/thumbnails/6.jpg)
6Chapter 1
C. Investment Bankers Oligopoly
Local Firms China Development Industrial Bank Taiwan Industrial Bank Securities Firms
![Page 7: 1 Chapter 1 Investment Banking Activities. 2Chapter 1 A. Investment Banking Activities Investment Bank Revenue-Generating Activities Support Activities](https://reader031.vdocuments.us/reader031/viewer/2022032015/56649cb15503460f94975f44/html5/thumbnails/7.jpg)
7Chapter 1
D. Types of Market Making
Brokered Trading Dealer Trading Market Making
![Page 8: 1 Chapter 1 Investment Banking Activities. 2Chapter 1 A. Investment Banking Activities Investment Bank Revenue-Generating Activities Support Activities](https://reader031.vdocuments.us/reader031/viewer/2022032015/56649cb15503460f94975f44/html5/thumbnails/8.jpg)
8Chapter 1
![Page 9: 1 Chapter 1 Investment Banking Activities. 2Chapter 1 A. Investment Banking Activities Investment Bank Revenue-Generating Activities Support Activities](https://reader031.vdocuments.us/reader031/viewer/2022032015/56649cb15503460f94975f44/html5/thumbnails/9.jpg)
9Chapter 1
![Page 10: 1 Chapter 1 Investment Banking Activities. 2Chapter 1 A. Investment Banking Activities Investment Bank Revenue-Generating Activities Support Activities](https://reader031.vdocuments.us/reader031/viewer/2022032015/56649cb15503460f94975f44/html5/thumbnails/10.jpg)
10Chapter 1
![Page 11: 1 Chapter 1 Investment Banking Activities. 2Chapter 1 A. Investment Banking Activities Investment Bank Revenue-Generating Activities Support Activities](https://reader031.vdocuments.us/reader031/viewer/2022032015/56649cb15503460f94975f44/html5/thumbnails/11.jpg)
11Chapter 1
E. Market Making by Underwriting
a. Equity financing vs. Debt financing Equity Financing
Venture Capital(VC) Initial Public Offering(IPO) Seasoned Equity Offering(SEO) Deposit Receipt(DR)
Debt Finance Mezzanine Finance Convertible bonds Government bonds Eurodollar bonds Junk bonds LYONs
![Page 12: 1 Chapter 1 Investment Banking Activities. 2Chapter 1 A. Investment Banking Activities Investment Bank Revenue-Generating Activities Support Activities](https://reader031.vdocuments.us/reader031/viewer/2022032015/56649cb15503460f94975f44/html5/thumbnails/12.jpg)
12Chapter 1
E. Market Making by Underwriting
b. Public offerings vs. Private placement
Public Offerings Private placement
c. Initial Public Offerings vs. Seansoned Public Offerings
IPOs Seasoned Public Offerings
![Page 13: 1 Chapter 1 Investment Banking Activities. 2Chapter 1 A. Investment Banking Activities Investment Bank Revenue-Generating Activities Support Activities](https://reader031.vdocuments.us/reader031/viewer/2022032015/56649cb15503460f94975f44/html5/thumbnails/13.jpg)
13Chapter 1
F. Market Making by Financial Innovation
* Conversion arbitrage : The investment bank takes one (or
more) financial instruments and, through a process of composition or decomposition, creates one (or more) very different financial instruments.
![Page 14: 1 Chapter 1 Investment Banking Activities. 2Chapter 1 A. Investment Banking Activities Investment Bank Revenue-Generating Activities Support Activities](https://reader031.vdocuments.us/reader031/viewer/2022032015/56649cb15503460f94975f44/html5/thumbnails/14.jpg)
14Chapter 1
F. Market Making by Financial Innovation
a. Mortgage Pass-through Mortgage-backed securities: a single-
class whole mortgage is used to create multi-class mortgage-back securities call collateralized mortgage obligations.
* GNMA collateralized Bonds * Collateralized Mortgage obligations
of FHLMC * GNMA-type CMOs issued by
subsidiaries of investment bankers, mortgage bankers and home builders
![Page 15: 1 Chapter 1 Investment Banking Activities. 2Chapter 1 A. Investment Banking Activities Investment Bank Revenue-Generating Activities Support Activities](https://reader031.vdocuments.us/reader031/viewer/2022032015/56649cb15503460f94975f44/html5/thumbnails/15.jpg)
15Chapter 1
F. Market Making by Financial Innovation
Demand side:1. For short term issues
Thrifts Commercial-bank portfolios Money-market funds Corporate treasurers
2. For intermediate term and longer term issues
• Insurance companies• Pension funds• Bank trust departments• Investment advisors• International investors
![Page 16: 1 Chapter 1 Investment Banking Activities. 2Chapter 1 A. Investment Banking Activities Investment Bank Revenue-Generating Activities Support Activities](https://reader031.vdocuments.us/reader031/viewer/2022032015/56649cb15503460f94975f44/html5/thumbnails/16.jpg)
16Chapter 1
F. Market Making by Financial Innovation
b. Zero coupon bonds a single-class conventional bond
is used to create a strip of individual zero coupon bonds
![Page 17: 1 Chapter 1 Investment Banking Activities. 2Chapter 1 A. Investment Banking Activities Investment Bank Revenue-Generating Activities Support Activities](https://reader031.vdocuments.us/reader031/viewer/2022032015/56649cb15503460f94975f44/html5/thumbnails/17.jpg)
17Chapter 1
Fixed-rate payer (S&L) has sold a hypothetical fixed rate security to the floating rate payer (the bank)
Floating rate payer (bank) has sold a hypothetical floating rate note to the fixe rate payer (the S&L)
c. Interest rate swaps
![Page 18: 1 Chapter 1 Investment Banking Activities. 2Chapter 1 A. Investment Banking Activities Investment Bank Revenue-Generating Activities Support Activities](https://reader031.vdocuments.us/reader031/viewer/2022032015/56649cb15503460f94975f44/html5/thumbnails/18.jpg)
18Chapter 1
G. Market Making by Corporate Restructuring
a. Expansion Mergers : horizontal, vertical,
conglomerate Tender offer Joint ventures
b. Sell offs Spin offs Divestitures
![Page 19: 1 Chapter 1 Investment Banking Activities. 2Chapter 1 A. Investment Banking Activities Investment Bank Revenue-Generating Activities Support Activities](https://reader031.vdocuments.us/reader031/viewer/2022032015/56649cb15503460f94975f44/html5/thumbnails/19.jpg)
19Chapter 1
G. Market Making by Corporate Restructuring
c. Corporate control Premium buybacks Anti-takeover amendments
d. Changes in ownership structure Exchange offers Share repurchases Going private Leverage Buy out (LBO)