Investment Pricing Methods: A Guide for Accounting and Financial Professionals

Preface.

Acknowledgments.

1 Pricing Concepts and the Term Structure of Interest Rates.

Introduction.

Present Value Formula.

Duration and Other Fixed-Income Pricing Concepts.

Concluding Remarks.

Notes.

Appendix A: Calculation of U.S. Treasury Bond Yield Curve.

Appendix B: Eurodollar Futures Yields.

2 Fixed-Income Pricing Matrix and Decomposing Yields.

Introduction.

Determining the Discount Rate.

Credit Rating Categories and Determination.

Processes for Decomposing Bond Yields.

Normalized-Yield Pricing Matrix.

Concluding Remarks.

Notes.

3 Public Corporate Bonds, Private-Placement Bonds, and Whole Commercial Mortgages.

Introduction.

Key Terminology.

Publicly Issued Corporate Bonds.

Public Corporate Bond Pricing.

Private-Placement Bonds.

Valuing a Private-Placement Bond.

Pricing Bonds that Have Sinking-Fund Payment Requirements.

Pricing Defaulted Bonds.

Whole Commercial Mortgage Loans.

Valuing a Whole Commercial Mortgage Loan.

Monetary Default Scenarios.

Notes.

Appendix C: Bloomberg-Yield to Call Data.

Appendix D: Selected Portions of BondCalc (r) Brochures.

4 Mortgage-Backed and Asset-Backed Securities.

Introduction.

Evolution of the Mortgage-Backed Securities Market.

Mortgage-Backed Securities.

Collateralized Mortgage Obligations.

Bloomberg Median Prepayments.

Stripped Securities.

Private-Placement Asset-Backed Securities.

Concluding Remarks.

Notes.

5 Privately Held Equity.

Introduction.

Equity Volatility.

Pricing Equity Issues.

Common Equity Pricing Models Used by Investment Analysts.

Price-Multiple Equity Pricing Models.

Discounted Cash Flow Approach Equity Pricing Model.

Basic Framework of Private-Equity Investing.

Accountant's Review of Private-Equity Valuations.

Concluding Remarks.

Notes.

6 Public Equity Pricing.

Introduction.

"Fox Rocks" Valuation Illustration.

Discounted Cash Flow Model.

Concluding Remarks.

Notes.

Appendix E: "Fox Rocks" Valuation Illustration.

7 Derivatives.

Introduction.

Forward Contracts.

Futures Contracts.

Option Contracts.

Swaps.

Credit Derivatives.

Forward Rate Agreements.

Notes.

Appendix F: Using Pricing Concepts of Fixed-Income Investments and Derivatives to Illustrate How to Hedge the Base Rate of Interest.

Appendix G: Fixed Income Option Strategies.

8 Partnerships.

Introduction.

Surfside Condominium Partnership.

Concluding Remarks.

Glossary.

References.

Index.