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Discount Certificates: An Alternative to Stock Investments von Schmidt, Roman (eBook)

  • Erscheinungsdatum: 01.07.2011
  • Verlag: Bachelor + Master Publishing
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Discount Certificates: An Alternative to Stock Investments

This work evaluates investments in discount certificates as an alternative to stock investments. It gives general information on the construction of discount certificates and the markets they can be traded in. In Addition, it describes and compares the opportunities and risks of stock investments and investments in discount certificates. It evaluates the development in value of both investments in different market environments. Using a fictive example, it shows that discount certificates outperform stocks in most market situations. The paper provides strategies for investments in discount certificates and evaluates them. Diese Arbeit bewertet Investitionen in Discount Zertifikate als Investmentalternative zu Aktien. Sie gibt unter anderem einen Einblick in die Art und Weise wie Discount Zertifikate aufgebaut sind und in welchen Märkten sie handelbar sind. Zusätzlich beschreibt diese Arbeit die Chancen und Risiken die mit einer Investition in Discount Zertifikate und vergleicht diese mit einer Aktienanlage. Dabei vergleicht sie die Wertentwicklung beider Investment-Formen anhand von verschiedenen Marktszenarien. Anhand eines theoretischen Beispiels wird aufgezeigt, dass in vielen Szenarien Discount Zertifikate besser abschneiden als Aktien. Schließlich werden verschiedene Investment-Strategien für Discount Zertifikate bewertet. Roman Schmidt wurde 1985 in Mannheim geboren und hat 2008 sein Studium zum Diplom Verwaltungswirt beendet. Sein Studium zum Master of Business Administration an der Hochschule für Ökonomie und Management wird er 2011 abschließen. Er beschäftigt sich bereits seit 2003 mit diversen Anlage und Finanzprodukten. Seit 2007 widmet er sich mit dem Thema Finanzderivate und hat sich in diesem Kontext intensiv mit den Discount Zertifikaten beschäftigt.

Produktinformationen

    Format: PDF
    Kopierschutz: watermark
    Seitenzahl: 41
    Erscheinungsdatum: 01.07.2011
    Sprache: Deutsch
    ISBN: 9783863415624
    Verlag: Bachelor + Master Publishing
    Serie: Diplom.de
    Größe: 236 kBytes
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Discount Certificates: An Alternative to Stock Investments

Text Sample: Chapter 3, Differentiation of Discount Certificates and stocks: 3.1, Opportunities and risks: DCs and stocks expose the investor to certain opportunities and risks. Since the DC is derived from the stock (underlying), some are similar. However, there are certain opportunities and risks, which apply only to the DC. A stock investment offers two ways of making a profit. The first is appreciation. An investor can buy a stock at a certain price and sell it at a much higher value. The difference resembles the profit. The second is dividends paid. A stock owner is entitled to a share of the profit of the particular company of which he owns the stock. If the company is profitable the investor receives a certain amount of money every year - called dividends. Stock investments also give voting rights to investors, which enables them to influence the company's way of doing business. As mentioned in Chapter 2.1 the DC does not pay dividends. So the only way of making a profit is selling the DC back to the issuer at a higher price than the investor has bought it. The sale either happens automatically when the DC matures, or during the maturity. The issuer sells the DC at a discount, which enables to investor to buy the underlying stock at a smaller price. At the end of the maturity the value of the DC equals the value of the stock or cap. So the investor posses the chance to make a profit even if the underlying stock does not performs in a positive way. The discount adds to profit in a positive market scenario. In addition, the investor can use the saved money to buy other investment products, e. g. DCs with a different underlying stock. Chapter 4 describes the situations in which a DC is more profitable than a direct stock investment. The economic risk refers to the 'risk associated with the overall health of the economy in the locality the investment is made'. For a stock investor the economic risk consists only of the uncertainty about the development of the economy the respective company is located in. If the company performs poorly the value of the underlying stock drops resulting in a loss for the investor. In Addition, expected dividends may not be paid. The same is true for a person investing in DCs. In addition, the investor interested in buying a DC has to consider the health of the economy in which the issuer operates in. DCs are unsecured bonds. This legal characteristic exposes the investor to the credit default risk. The investor may realize a total loss of his money invested in DCs irrespective to the performance of the underlying. If the issuer of the DCs files bankruptcy, the investor will only be entitled to a small compensation according to value of the issuer after it has been liquidated. The default of Lehman Brothers in 2008 is a prominent example for this risk. The foreign currency risk describes the risk implied by a change of the exchange rate between two currencies (Organisation for Economic Co-operation and Development. If the investor (located in the Eurozone) buys a stock or other financial product in another currency e.g. Dollar, then the value of the investment can change only due to a change in the exchange rate. If the Dollar decreases in value compared to the Euro, the investor makes a lost on his investment even if the nominal value of the financial product has not changed. A person invested in DCs with an underlying of stocks denominated in a foreign currency, is exposed to the same risk. However the mechanism works in both directions, therefore an investor may use a current weakness of the foreign currency to buy DCs. The currency exchange rate will then work as leverage for the investment. The same chance is also implied in an investment in stocks (denominated in a foreign currency). An investor interested in DCs faces the problem that the issuer of a DC may quote unfavourable prices. As explained in Chapter 2.2 the issuer of a DC is virtually involved in every transaction of a DC. Wilk

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