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Wealth Management, 1st Edition

 
Wealth Management, 1st Edition,Dimitris Chorafas,ISBN9780750668552
 
 
 

  

Butterworth-Heinemann

9780750668552

9780080461649

352

234 X 165

Financial expert Dimitris Chorafas explains the real risks and returns of structured financial products in private banking.

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Key Features

*Because it is based on intensive research, the book is rich in practical examples and case studies
*Addresses the growing trend towards the use of structured financial instruments in private banking
*Thorough treatment of structured financial products that keeps maths to a minimum

Description

This book has two themes: Private Banking and investment decisions regarding Structural Financial Products. Dr. Dimitris Chorafas examines in a rigorous way whether structured financial products are advisable investments for retail and institutional investors and, if yes, which risks they entail. As our society becomes increasingly affluent, and state-supported pension schemes find it difficult to survive, a growing number of high net-worth individuals, and families, have become retail investors – looking for ways and means to optimize wealth management, and Private Banking deals with these sorts of clients. Private banking also deals with clients that are institutional investors, such as pension funds, mutual funds, and insurance companies, as well as not-for-profits, foundations and companies explicitly set up for wealth management. Both institutional and retail investors are being offered by the banks they work with structured products. Typically, these are securities that provide them with a redemption amount, with may be either with full or partial capital protection, and some type of return. The book examines structured financial products, their polyvalent nature, and the results which could be expected from them.

Return on structural instruments, which are essentially derivatives, is paid in function of a specific investment strategy on selected underlying asset(s). This essentially means on the performance of the underlyings, obtained by asset managers, which may be banks or hedge funds, through purchase or sale of embedded options. But there are risks. Both risk and return from structured products are related to three main issues: the volatility of future value of an underlying, the uncertainty of future events, and the exposure of the product. Every type of investment is subject to market forces, and the more leveraged a portfolio is, the greater will probably be both the assumed risk and the expected reward. The fact that structured financial products appeal, or at least are being marketed, to both retail investors and institutional investors makes the dual approach deliberately chosen in this book most advisable. This book addresses all these issues in a practical manner with numerous case studies and real-world examples drawn from the author’s intensive research.

Readership

At the institutional side are the practitioners and professionals, from treasurers to operational executives, risk management officers and their staff, as well as auditors and financial analysts; investment consultancies; accountancies; auditing firms, independent rating agencies, and central bankers.

Dimitris Chorafas

Since 1961, Dr Dimitris N. Chorafas has advised financial institutions and industrial corporations in strategic planning, risk management, computers and communications systems, and internal controls. A graduate of the University of California, Los Angeles, the University of Paris, and the Technical University of Athens, Dr Chorafas has been a Fulbright scholar. Financial institutions which have sought his assistance include the Union Bank of Switzerland, Bank Vontobel, CEDEL, the Bank of Scotland, Credit Agricole, Österreichische Länderbank (Bank Austria), First Austrian Bank, Commerzbank, Dresdner Bank, Mid-Med Bank, Demir Bank, Banca Nazionale dell'Agricoltura, Istituto Bancario Italiano, Credito Commerciale and Banca Provinciale Lombarda. Among multinational corporations Dr Chorafas has worked as consultant to top management, are: General Electric-Bull, Univac, Honeywell, Digital Equipment Corp, Olivetti, Nestlé, Omega, Italcementi, Italmobiliare, AEG-Telefunken, Olympia, Osram, Antar, Pechiney, the American Management Association and host of other client firms in Europe and the United States. Dr Chorafas has served on the faculty of the Catholic University of America and as visiting professor at Washington State University, George Washington University, University of Vermont, University of Florida, and Georgia Institute of Technology. Also, the University of Alberta, Ecole d'Etudes Industrielles de l'Université de Genève, and Technical University of Karlsruhe. More than 6,000 banking, industrial and government executives have participated in his seminars in the United States, England, Germany, other European countries, Asia and Latin America.

Affiliations and Expertise

Independent Finance Consultant, France

View additional works by Dimitris N. Chorafas

Wealth Management, 1st Edition

PART ONE: PRIVATE BANKING

Chapter 1: PRIVATE BANKING DEFINED
1. Introduction
2. Private Banking Clients
3. Organizational Challenges, Security and Secrecy
4. A Private Banking Roadmap
5. The Recycling of Household Debt Through Private Banking
6. Synergy of Private Banking and Institutional Investors
7. A System Approach to Wealth Management

Chapter 2: KNOW YOUR CUSTOMER AND HIS/HER PROFILE
1. Introduction
2. The Sense of Professional Investment Services
3. Wealth Management in Accordance to the Client's Profile
4. Knowledge Engineering Is Assisting the Investor
5. A Financial Advisory System for Currency Exchange
6. Caveat Emptor and Accountability in Private Banking

Chapter 3: BUSINESS OPPORTUNITY: FEES AND COMMISSIONS FROM PRIVATE BANKING
1. Introduction
2. Trades, Investments, and Private Banking Customers
3. Establishing a Strategy of Fees and Commissions
4. Different Types of Companies Have Different Strategic Aims
5. Performance and Remuneration of Investment Managers
6. Simulation of Portfolio Performance
7. The Impact of Business Risk

Chapter 4: RISK AND RETURN WITH INVESTMENTS
1. Introduction
2. Basic Notions of Risk Assessment
3. Prerequisites for Rigorous Risk Control
4. Fine-Tuning the Philosophy of Investments
5. Risk and Return with Implied Volatility
6. Risk-Adjusted Pricing. An Example with Credit Risk
7. An Introduction to Stress Testing

PART TWO: ASSET MANAGEMENT

Chapter 5: ASSET MANAGEMENT DEFINED
1. Introduction
2. Integrated Financial Markets
3. Asset Allocation Strategies
4. Asset Allocation and the Shift in Economic Activity
5. Real Estate Property Derivatives. A Case Study
6. Passive and Active Investment Strategies
7. A Critical View of Investment Strategies
8. The Portfolio's Intrinsic Value

Chapter 6: BUSINESS MODELS FOR ASSET MANAGEMENT
1. Introduction
2. Choosing the Investment Manager
3. The Contribution to Asset Management by Contrarians
4. Asset Management as an Enterprise
5. Hedging Strategies Followed by Portfolio Managers
6. Deliverables, Performance and the Administration of Assets
7. Past Performance Is No Prognosticator of Future Results

Chapter 7: OUTSOURCING AND INSOURCING ASSETS
1. Introduction
2. Risk and Return with Outsourcing
3. Custody Only, Mid-Way Solutions, and Discretionary Powers
4. Building Up the Investor's Portfolio
5. Efficiency in Private Banking and in Asset Management
6. Conceptual Factors in Portfolio Management; the Option Model of Investing
7. The Private Banking Profit Center

Chapter 8: TRUST DUTIES AND LEGAL RISK
1. Introduction
2. Trust and Trustee Responsibilities
3. Legal Risk and the Case of Tort
4. Reasons Behind Legal Risk, and Cost of Litigation
5. Legal Risk and Management Risk Correlate
6. Mishandling the Client: Small Cases Which Can Lead to Legal Risk
7. Big Cases of Legal Risk: Parmalat, its Investors, Auditors and Bankers

PART THREE: DERIVATIVE FINANCIAL INSTRUMENTS, STRUCTURED PRODUCTS, AND RISK CONTROL

Chapter 9: DERIVATIVE FINANCIAL INSTRUMENTS DEFINED
1. Introduction
2. The Changing Nature of Derivatives
3. Underlying and Notional Principal Amount
4. Derivatives Which Became Institutionalized
5. Private Banking Derivatives
6. Bank Capital Invested in Derivatives
7. Dr. Alan Greenspan on Derivatives
8. George Soros on Derivatives

Chapter 10: STRUCTURED FINANCIAL PRODUCTS
1. Introduction
2. Structured Products Defined
3. Structured vs Synthetic Products
4. The Role of Strategists, Traders and Modeling Controllers
5. Capital Protection. Real or Fancy?
6. Adjustments and Redemptions of Structured Products
7. The Illiquidity of Structured Instruments

Chapter 11: CONTROLLING THE RISK TAKEN WITH STRUCTURED PRODUCTS
1. Introduction
2. Credit Risk
3. Bond Spreads
4. Liquidity Risk
5. General Market Risk
6. Market Volatility Risk
7. Asset Protection from Volatility in Interest Rates
8. Equity Derivatives and the "Greeks"

PART FOUR: CASE STUDIES WITH THREE MAIN CLASSES OF STRUCTURED PRODUCTS

Chapter 12: FIXED INCOME STRUCTURED PRODUCTS
1. Introduction
2. Structured Notes Defined
3. The Broader Horizon of Debt Securities
4. Types of Fixed Income Derivatives
5. Capital Protection with Fixed Income Instruments
6. Protected Interest Notes
7. Secondary Markets as Indicator of Market Discipline

Chapter 13: PRACTICAL EXAMPLES WITH FIXED INCOME DERIVATIVES
1. Introduction
2. Inflation-Linked Notes
3. Real vs Nominal Interest Rates
4. Capital Protected Notes
5. Accrucal Notes
6. Callable Reserve Floaters
7. Stairway Notes
8. Fixed and Variable Rate Notes
9. Bull Notes
10. Structured Instruments for Credit Risk

Chapter 14: EQUITY-TYPE STRUCTURED PRODUCTS
1. Introduction
2. Equity Derivatives
3. Players in Equity Derivatives
4. Speculation with Equity-Type Products
5. Risks Taken with Analytics
6. The Irrelevance of Book Value
7. Case Study with Quoted Companies
8. Case Study with Private Equity Funds

Chapter 15: PRACTICAL EXAMPLES WITH EQUITY TYPE DERIVATIVES
1. Introduction
2. Absorber Certificates
3. Early Repayment Certificates
4. Enhanced Yield Certificates
5. Reverse Exchangeable Certificates
6. Potential Share Acquisition Certificates
7. EUR Complete Participation Securities
8. US$ Non-Interest Bearing Note Linked to Equity
9. The Price of IPOs

Chapter 16: CURRENCY EXCHANGE STRUCTURED PRODUCTS
1. Introduction
2. Currency Transactions and Economic Exposure
3. Aftermath of Exchange Rate Volatility
4. Structured Instruments on Forex Rates and Mismatch Risk
5. Dual Currency Structured Products
6. US$/Asian Currency Basket
7. Stress Testing for Interest Rate and Forex Risk

Appendix: DERIVATIVES AS A TAX HAVEN
 
 
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