CONTENTS

Chapter 1 Introduction

Chapter Summary 1

Answers to End of Chapter Questions 6

Chapter 2 Overview of Market Participants and Financial Innovation

Chapter Summary 9

Answers to End of Chapter Questions 13

Chapter 3 Depository Institutions

Chapter Summary 16

Answers to End of Chapter Questions 22

Chapter 4 Nondepository Institutions

Chapter Summary 26

Answers to End of Chapter Questions 34

Chapter 5 Investment Banking Firms

Chapter Summary 39

Answers to End of Chapter Questions 42

Chapter 6 The Primary Markets

Chapter Summary 45

Answers to End of Chapter Questions 48

Chapter 7 Secondary Markets

Chapter Summary 50

Answers to End of Chapter Questions 55

Chapter 8 Risk and Return Theories:I

Chapter Summary 59

Answers to End of Chapter Questions 63

Chapter 9 Risk and Return Theories:II

Chapter Summary 66

Answers to End of Chapter Questions 71

Chapter 10 Introduction to Financial Futures Markets

Chapter Summary 74

Answers to End of Chapter Questions 79

Chapter 11 Introduction to Options Markets

Chapter Summary 82

Answers to End of Chapter Questions 86

Chapter 12 Introduction to the Swaps, Caps, and Floors Markets

Chapter Summary 95

Answers to End of Chapter Questions 98

Chapter 13 Common Stock Market:I

Chapter Summary 100

Answers to End of Chapter Questions 106

Chapter 14 Common Stock Market:II

Chapter Summary 109

Answers to End of Chapter Questions 115

Chapter 15 Stock Options Market

Chapter Summary 119

Answers to End of Chapter Questions 123

Chapter 16 Stock Index Derivative Markets

Chapter Summary 126

Answers to End of Chapter Questions 131

Chapter 17 The Theory and Structure of Interest Rates

Chapter Summary 135

Answers to End of Chapter Questions 139

Chapter 18 Valuation of Debt Contracts and their Price Volatility Characteristics

Chapter Summary 142

Answers to End of Chapter Questions 149

Chapter 19 The Term Structure of Interest Rates

Chapter Summary 155

Answers to End of Chapter Questions 159

Chapter 20 Money Markets

Chapter Summary 164

Answers to End of Chapter Questions 171

Chapter 21 Treasury and Agency Securities Markets

Chapter Summary 174

Answers to End of Chapter Questions 178

Chapter 22 Corporate Senior Instruments Markets:I

Chapter Summary 183

Answers to End of Chapter Questions 185

Chapter 23 Corporate Senior Instruments Markets:II

Chapter Summary 187

Answers to End of Chapter Questions 192

Chapter 24 Municipal Securities Markets

Chapter Summary 195

Answers to End of Chapter Questions 199

Chapter 25 The Mortgage Market

Chapter Summary 201

Answers to End of Chapter Questions 207

Chapter 26 The Market for Mortgage-Backed Securities

Chapter Summary 210

Answers to End of Chapter Questions 215

Chapter 27 The Market for Asset-Backed Securities

Chapter Summary 218

Answers to End of Chapter Questions 223

Chapter 28 Exchange-Traded Interest Rate Futures and Options

Chapter Summary 228

Answers to End of Chapter Questions 231

Chapter 29 OTC Interest Rate and Credit Derivative Markets

Chapter Summary 235

Answers to End of Chapter Questions 241

Chapter 30 The Market for Foreign Exchange and Risk Control Instruments

Chapter Summary 247

Answers to End of Chapter Questions 251