Foreword by Sheldon Gordon vii
1 The marketplace 1
The state and the financial markets 3
The capital cities of trade and commerce 7
How stock exchanges began 13
The farmers and financial markets 21
2 The mechanics of financial markets 29
Hard bargaining or software mediation 31
How prices are established on organized markets 35
Bulbs, bubbles and bull markets 37
3 Globalization 46
Common currency 48
Foreign exchanges 55
Finance capital of the world? 62
4 The future is the field of play 66
As time goes by 68
A roll of the dice shall never abolish randomness 79
How normal is it for stock prices to fluctuate? 85
When managing risk, diversify 96
When managing risk, wait and see 104
Contents
5 The price of stocks 111
The value of art and the art of value 112
The market will fluctuate 120
A major yet largely misunderstood principle 125
Speculative value
6 The derivatives markets
Futures and forward contracts
Options
The risks of derivatives
7 My word is my bond
Interest and rent
The value of bonds
The term structure of interest rates
My word is not my bond
8 The issuers of financial instruments
Capitalism or capitalisms?
Managing for value
Enterprise value
The values of corporate finance
9 The investors
High net worth individuals
Equity funds
Hedge funds
Pension funds
Notes
Index 281