Xiamen University Professor Zheng Zhenlong in the Southwest University of Finance's speech …… Financial engineering is a new discipline, this appears beyond the traditional disciplines of finance have great impact. Therefore, we are in fact from a new perspective to a new awareness of financial issues. First look at what is financial. I read undergraduate school in 1982, now has more than 20 years have passed, the teacher taught me, is the capital of financial intermediation, or financial, teachers do not know how to teach you. In fact it is now the understanding is very narrow, in accordance with the definition of finance can be divided into MANETARY ECONOMICS and FINANCIAL ECONOMICS. Financial economics is actually new financial. With foreign financial big difference between the domestic financial, we should be very familiar with this, I do not speak the more. Research in financial economics is uncertain conditions, the assets will be along the two dimensions of time and space for the optimal allocation of decision-making science, it is very micro, in foreign countries belong to the areas of management. In simple terms is about the time and risk of Economics. So for the time economics, we all know is mainly on interest rates - the currency in terms of time value. So we decided to study the level of interest rates and term structure of interest rates and so on. With these two things, we can be cash flow at different time points along the timeline between the freedom of conversion. With immediate term structure we can have long-term maturity structure, all along the time dimension on the cash flow we can compare. Otherwise, today's 100 yuan with the money 100 years ago, 100 years after the 100 yuan gap between how much money we simply can not can not be measured. Another is the risk of Economics, which involve risk identification, risk management and risk pricing, if we can measure the risk will be worth the risk into uncertainty value. This is the time dimension. So is the latitude of space assets in space configuration. Various asset value at risk not the same, no conversion can not be compared. So pricing is beyond the end of it into a certainty equivalent. All the things converted into uncertainty after the equivalent of two equivalent coordinate axis, a timeline, a space-axis, and then intersection along a different axis can be compared to as the center point of intersection.
Finance and Economics What is the difference? » Our domestic finance in economic subjects below, in fact there are significant differences. We all know that economics is the most important general equilibrium analysis, it is a further breakdown of supply and demand analysis. …… But in our finance, we also balanced with the general law, we also have general equilibrium model, but supply and demand analysis in the financial field we used the very small. …… Virtually any person in the financial markets are also providers who demand. And no industry in the homogeneity of the products can be compared with the financial markets. Our product does not look like it is the five-year deposits, which is one-year deposit, which is foreign exchange, stock, bonds, not the name sounds like. However, the same substance, is what » "Three", profitability, liquidity and safety. All the different things on the surface, but these three are the last things. Therefore, the financial markets, the financial sector is the largest financial characteristics of homogeneity. …… This has resulted in a fully developed market, supply and demand curve will be two horizontal line, not economics in the curve. Therefore, the financial markets balanced only coincidence in the horizon when the two will be balanced. Once these two left curve when the price is wrong, prices will appear once deviated from arbitrage, and the rapid spread of the two curves coincidence. Therefore, the financial balance-not only on the balance point. …… So in the last financial discovered arbitrage-free analysis. Because everyone can supply and demand, which has led the market on the balance of power on arbitrage. ……
…… In financial economics say no more arbitrage is relatively pricing, and other subjects is more absolute pricing. For example, stocks, the traditional view that economics is very simple stock is the future of the cash flow forecast by then to discount, the discount what to do » Is risk-free rate? » Can not. Finance on the most basic principle, which is a discounted cash flow, how much risk it will be used in line with its discount rate to discount. Whether this theory of Marxism or other Western scholars are acceptable, very good, but using them will certainly not useless. Why not use, first of all let you predict next year's cash flow can, the year after the makeshift cash flow, the year after it was quite difficult, even after five years of cash flow that is Mopu. So who is also cash-flow forecast Gao Buding. Besides the discount rate, and it should suit the discount rate,好说words, but in the end should be the number, then Western scholars spent CAMP several decades to the present controversy is great. In the end the U.S. stock market is expected to yield the number, nobody spectrum. These two factors led to the absolute pricing method is not useful. However, the relative pricing is not the same, no absolute level of clearance, I just our two locations. …… So many financial assets are the same, eventually all up to three of the many financial assets in the three properties on a certain relationship, a sale of financial assets amount of money, I can give you the relative amount of money selling. The most typical is the futures, options and standard features you how much money the assets sold, the price I can sell how much money. For instance, prices of long-term, F = S * EXP (R * T), as long as the spot price that risk-free interest rate that expire time that forward and futures prices will certainly know. Both must maintain this relationship, which is relatively pricing. The relative pricing of the scientific theory may not absolute pricing, but in real life is the ease of use. ……
…… In the end could create financial value » This is the central problem, you may now feel that the redistribution of financial participation, will not create value. Today, we are used to prove the fact that numerous financial value creation. …… We have to the land of China to explain that China claims Detaiwubo, excellent Jiangshan. And the United States telling the truth, in addition to individual attractions, we Chinese can not Jiangshan beautiful than the United States, the United States than we absolutely. You said the United States of Great Falls, Yellowstone National Park can be, but compared to our Tibet, it is a shame Huangshan. But the same Yimu in Chengdu may be 1 million, while in Manhattan is not conceivable.为什么» A deciding what the value of things, the production of such goods by the needs of socially necessary labor time » Chengdu to create a time in Manhattan with the United States to create the time may be similar, the difference why the value of the hanging, it is is this thing in the future to create much value, take a decision on the future we can bring the number of cash flow. To listen carefully, that piece of land can give you the number of future cash flow » He is now converted to the value, which is the financial values. …… Financial may not in itself create value, but through financial future so that we create in the future all the time to multiply the value, or 10% of its value now on the increase. So what a listed value of a billion previously, after listing the value of 10 million, of which many people say that this bubble, we do not rule out the possibility that there may be bubbles of them, but 200 million is likely to bubble, but 800 million is what » 600 million or 500 million, or ask how is this 500 million to the » Who is now listed in this moment to create the right » We are fabricated by those investment bankers on the document created? » No, because after listing a better mechanism, on the whole, listed companies listed by the allocation of higher efficiency than before, so the same things for his future every time we create things will grow. Well, he now has to raise the value,…… My whole idea is to create a certain financial value. Through four ways: First, the flow of things will not flow; Secondly, the insecurity of things changed the security of the third, things will not change the perfect perfect; fourth, the world will not become fully More fully. Mainly through the four financial means to create value.
First of all, we look at mobility, not a word is to let the flow of things flow together. First of all to ask mobility has value, if valuable, we have to create liquidity can create value. Mobile performance can not create the value we do not answer, look at how to measure the value of mobility. If we can measure up or can cite many examples to note on the flow of value, the value of mobility of people immediately understand. In the most typical example is the state-owned shares and individual shares, what are the same except mobility. Most of their value when the bad times. This is the movement of the stock and can not flow between the value of the shares the distinction. Well before issuing treasury bonds is rigidly apportioned in the already small number of wage Yingse on government bonds, treasury bonds now in Phnom Penh has become a very hot. Can now flow to the sale, before payment can only be due, among sell it or illegal. So mobility will create value. ……
Liquidity is not fully realized, for instance, the poor liquidity of the house, I can sell a penny, immediately realised. So are mobile, can only say that liquidity is good or bad. Time deposits realised that it is good or bad » Well, because time deposits have realised ahead of the main draw, but are subject to loss of interest, even if you only a day, all in accordance with the live period, the value of fixed deposits is this, if you deposited 1 million today, five years Maturity is 1.13 million, by two points for interest rates. If interest rates unchanged, we simplified the value of this is the direction (the blackboard painting), but once you extract the advance, it can only be in accordance with the demand, is a horizontal line, the real value of this path, only this one day due to the daughter-in-law Aocheng Great, it has jumps. The advance paid by such a demand on the slope to you, so he is the value of such a path. This is the realization of the loss, the more liquidity on the next worse, just before I put to him, the greater the loss due time. There is also a way to pledge collateral loans. You deposit rates for 2:00, 5:00 several loans, the price is great. Unless you are poor due a few days, you pledge does not matter. In the middle you're embarrassed, embarrassed paid in advance, pledge also embarrassing. So liquidity bad, we do not want to choose lead to five-year period deposits. Is not transferable, the transfer of real-name system is now relatively trouble, there is no way. Well, I for banks to offer such a proposal, in order to raise time deposit interest rates at the same time avoid the Banking Bureau under the supervision of the Banking Board requested at a rate not increase, an increase of the high-tension lines on the pedal. Well, I do skip the financial supervision is very easy, because I can not increase interest rates by increasing the mobility of! If the real-name system to be bypassed, it can do so, I absorb the five-year period of time deposits, I am committed to the customer, you can always sell this thing will be returned to me, in accordance with a formula to do, if interest rates unchanged Then you hold each day, on the basis of this curve, I give you, you keep two and a half years I gave you so much, this is a purely theoretical assumptions. You say now how Lane » This issue is not, I ask this of 1 million recently, I give him such interest, for example, 1.08 million, this thing I would like to sell others, such as 1.1 million, no one should » The first to be, the longest period of time only 12, but the income is still a few 2:00, while the other one-year deposit interest rate was 1.98. No loss of banks, to buy back as long as the first to be resold. Banks no cost, no loss, only the role of setters, Ho Lok not. …… Others have not done so, you do so all the 5-year deposits have come here went to you. Because it provides full mobility, my value as long as the curve in this competition on top of my stronger than others. Speaking just a totally competitive market, banks to do so it can attract customers. Even from this business you can make money. Therefore, financial engineering is a use of the things that we do not扎day in math reactor inside Chubu Lai. To get out of, think about it everywhere possible. …… This example on financial engineering in the bank note inside the premises.再举example of a mobile,…… I wrote his doctoral dissertation in 1995 when I proposed to solve the whole problem of the 16-character principle of mobility, and now almost all the many discussions. 95 now has more than nine years, up to now have not yet been resolved. I in 2001 in the United States, it is the most intense internal debate, the Commission collected more than 1,000 programmes. Today, I actually listen to lectures we will find full circulation problem is so simple. Only a question of implementation of a policy. Full circulation is doing, is to let the full circulation of shares in circulation can not be part of it in circulation, which itself is in the creation of mobility. To create liquidity will certainly create value. So good judgement that the reform programme can not judge whether he is the only reform. China is now a lot of reform for reform and, in fact, is in regression. He is good or bad judgement is whether he can create value, this is the economist, if he depends on whether politicians are conducive to social stability. So the only criteria is to create value or the eradication of value. As long as it is to create value there must be a solution, and must be win-win solution. …… So good, to look at the reality of China's one-third of the shares can flow, two-thirds of the shares can not be in circulation. For example, a total of 300 million shares, 200 million shares are state-owned shares, 100 million personal shares. State-owned shares is in accordance with the terms of the value of net assets, the assumption that two yuan of net assets of money, a total of 400 million yuan, if the individual is 600 million shares, this data is to facilitate, for example, we do not mind. The total value of 1 billion. Full circulation is to enable the state-owned shares in circulation, this will definitely increase in value, but does not rise to 6 yuan of money, because the scarcity of liquidity, this thing of value is relatively high, and more mobility, the mobility of the value will drop . Will lead to the ultimate value in the balance between the two, assuming that balance point is 5 yuan. This is the original 10 million shares, while the total value is 15 billion. So let the whole community full circulation of wealth increased by 5 billion. So full circulation from the overall situation of China is definitely a good thing, the total market value will become 1.5 billion from 1.0 billion. Then lies in state is black, said full circulation to create the value of all I bring, I want to have. So the people that I am full circulation will damage the interests not only increase but will not drop, the stock market or Jiumo Ming. However, there is a win-win solution, you are the original? 4:6, the ratio is also in accordance with the distribution, you 6 billion, 9 billion, so we have the assets of 50 percent growth, which resolved all the problems. Full circulation can be sure that the prices will certainly not let this money into two yuan. A truth, the original part of the change is not good for the circulation of mobile bring value, so the total assets of certain growth. With the growth in the number of the relevant market conditions, linked with the relevant funds, with public relations. But overall, a certain growth. …… As for the number of points, that is what politicians, but the direction is the case. Our demand is to create value, fair distribution of multi-income. States also will have a very healthy development of capital markets. Now transfer that interest, but will return in the long term. Because such a capital market is fully effective, then through the market in the allocation of resources will Effective risk management, risk management must be, there are many examples. For example the exchange. Now you average age of 25-year-old, working 60 to 35-year-old is also available. Now you are basically no money, but after 35, some people have good luck, become a billionaire, some people have become particularly unfortunate Qiongguang Dan. This is inevitable, is risk. Now you do not know how you will, that is, you face uncertainty, now become the most simple assumption, you have only two states, you are either billionaires, or Qiongguang Dan. Probabilities are equal, is 50 million from expectations. This way you will not be happy in life, you should continue to accumulate money. But the Americans why so潇洒, because he retired when there is a stable source of income, so money can be spent out. Therefore, the Chinese people especially the poor. When the young are on time do not have the money. You Leqian so that we do not have the time. To retirement when the time is money, not the energy. Americans will be good for his own life so a high degree of happiness. Individual Americans of wealth, we will not be higher than that. So faced with the risk we have to learn management, the first to participate in social security. China's social security we all Bugangongwei, efficiency is very low, so do not want to. So I will give you advice, you will all go back to the squad, bringing together people signed a contract, you have 60 years of age, the property will be a very out to the squad leader, all added together, divided by the total number of 100. If just the assumption is correct, you have 50 individuals are billionaires, 50 individuals are Qiongguang Dan. Rich with 10 million each, with 5 million results back. And with 0 to the poor, but with 5 million back. You are a billionaire, simply do not care about the show 5 million to help the students. If you are Qiongguang Dan, then 5 million pairs of you, very important. …… Our financial theory tells us that our investments should be diversified. But with the specialization and diversification has always been a contradiction. It means that I should diversify investments, stocks, bonds, real estate, gold, works of art, the more dispersed the better. But I do not necessarily those of professionals, buy the Mona Lisa's smile returned, found to be false. Because I simply do not have the knowledge, and I would also like to these investments to build art museums. Buy gold, I would also like to study gold, not so much time. So specialized is scattered with a pair of contradictions will never be solved. How to do that, you are a gold expert, I was art expert, you are American experts, I was South African experts, we cooperate together. We have 10 million, the specialized investment in your professional field, so the annual investment income divided by the combined number of points for everyone. This way is the best person to do the most professional thing, sharing the best results. But if you do not trust me, I do not trust you out. Originally a lot of good things can not be reached. We said that the purpose of financial engineering is the design of certain contracts so that we better, and then going to promote it. Credit risk we have to solve the credit risk in a variety of institutional arrangements. Members said Zhiduoshaoqian safety, security, the value can be measured by many. As wheat, the harvest next year, there are two options, the first sale of wheat futures now, or wait until next year to sell the Suixingjiushi. However, if we sell now than to wait until next year to buy less, and this is because safety. For security I am willing to pay such a price. There are uncertainties equivalent, it is expected the number of « I do not what is the value of uncertainty, which is the difference between the value of security. Therefore, this part of the non-systemic risk that is to say, to cover all out. Because the non-systemic risk is no income. If that is negative systemic risk, should never Zhao Shi of the Qumo nothing to it. Otherwise, not only income but also not to take risks pay the price. Is not to say that people have to have a return才行, mainly to the risk of your ability to select your risk value.be the future cash flow
growth. ……
The third point is not perfect become perfect. There are transaction costs and tax short-selling restrictions, regulations of the world is not perfect. So you have to bypass them solve these problems on the line. Merton noted that the transaction costs for financial institutions, the existence of a huge stage. In order to solve the problem before transaction costs in the Fund. Think about it you, I order to spread the risks, I would buy shares on the How do I do that, I bought the East, West to buy one point, my 1 million yuan so much money to buy the stock, this is not tired? » I was commissioned by the Fund to do, as long as funds to buy it. This is the portfolio investment. You learn a CAPM, but you may have forgotten that this is a static model, CAPM tell you to spread the risks, should portfolio investment. Members may be simple to understand for me scattered on the line, I do not have regardless, not the East-West-liang. In fact, where the investment portfolio to continue to adjust the portfolio. In the continuous-time state should adjust the time to achieve optimal. However, we who can do that, today, buy, buy tomorrow, Suanlaisuanqu not so accurate. Transaction costs have led to these are not feasible, then handed over to a fund like. We know how many of the world's source of risk, then the world as long as there is some risk enough. If we buy these types of funds can control these types of risk. So the main risk is the copy provided to all risk management. You are going to bear this risk can, you are going to transfer this risk can be. You can sell to buy, you risk management makes this very convenient, effective this. However, we actually fund the manipulation of the stock market makers, so many things in China are the Bianwei. Only now emerging direction of change for the better. Futures is the same, in fact replace the spot. Through this formula you can do a lot of Lenovo. In fact the cash to buy futures and buy the same. But the need bond futures trading, spot trading transactions is full. As the use of margin trading funds so low, the lower transaction costs. Futures in addition to speaking in front of the function, the more important one is to facilitate transactions. Reduce the cost of a seven-day notice is the use of deposits. Do you have any of the seven-day notice deposit » I have a test this thing. Seven-day notice deposit in a bank deposit into the future, do not tell you when extracted, the interest rate in accordance with the seven-day notice deposit rate to you, that a few relatively high. As long as you extract in the seven-day advance notice before me. If you notice today, the seventh day you do not have to take, on the eighth day into all the demand. Even if you keep a hundred years, all of a call. If you take to the sixth day, the banks will refuse to you. Have to seventh day of the past. This is seven days notice deposits, as a system requirements down, so very inhumane. To me it is, I will be my money there now as a governor of the students there. I asked him now on seven days notice of deposits. To seven days after I went to the bank is not, I will be your bank raised the money to deposit into account, while doing a seven-day notice. Then this constant cycle. We also have a set of laws called the two-changed. Do not tell you how long into the deposit, as long as the minimum deposit period of the deposit period, the rate of interest paid on the basis of this, about a 40%. If you keep this five-year, all in accordance with the maturity period of five years of a 40% interest rate, I tell you, you to deposit the amount I did not notice deposits of more than seven days. A careful look at many of our requirement is a problem. I would like to deposit this five-year no-call seven days. So you do not live set of two changes, and do not survive for deposits. Deposits of seven days notice is the big deal-two change. More effective is the day notice, a total of compound interest. Therefore, banks must reflect innovative human services. I propose a bank customer to do such a commitment, this is the big sales, can not advertise in newspapers, The Banking Bureau will not find him. Managers of large customers that you deposit the money has come in every seven days I have seven days notice in accordance with the deposit interest to you. Maturity is not taken out on the profits roll benefit? » Therefore, 52, 2001 is power. Now you do not have demand deposits in the bank? » You up after a day of the first thing is to bank the money taken out, and then deposit into account. This year more than five yuan to the money. Banks have no way to do so, because the voluntary deposits, withdrawals free. So you have to ruin a bank is easy, you let workers take one yuan per day to repeat such a thing. Banks say you trouble, you can claim that this is to maximize the protection of your interests. Because I do not count extracted from simple, extracted count for compound interest. Another innovation is the payment system in order to reduce costs. Through the Internet transaction costs a bank only 1 percent of transaction costs. In the United States Instinet, Open-IPO, Ebay, B-to-B transactions, such as the appearance is to reduce transaction costs. There is also a world is not perfect, that is, asymmetric information and agents to resolve the problem. Throughout history, asymmetric information contributed to a lot of innovation. Haugen and Senbett (1981) found that the securities will be embedded in the options can ease the problem of moral hazard, such as in R & D financing in the embedded options. The capital structure of the management structure will have a decisive role. Relatively sound management structure also depends on the risk of moral hazard. …… Last one is not entirely the world, in the world in the N risk, but not so many securities, there are some risks we can not go to evade. Our financial engineering is to make our world completely as possible. So that we can free time and space along the allocation of resources. Found that enterprises should provide for the right to meet a variety of different preferences and needs of the needs of investors. A study found that the right to obtain a variety of enterprises, which means that enterprises will tear debris. He not only want to issue stock, and to let him issue a variety of things. Financial institutions obtain the right product is a combination of enterprises, is in fact an intermediary, not the ultimate provider. So, this is the four dimensions. To sum up: First, the flow of things will not flow; Secondly, the insecurity of things changed the security of the third, things will not change the perfect perfect; fourth, all of the world so that it does not fully Become more complete. These things is that financial innovation. In addition to that financial innovations contributed to technological progress. Technological progress to promote financial innovation. Information technology, communications and the development of the Internet led to the large number of financial innovations, such as securities underwriting the new method (OpenIPO), set up the portfolio of new methods (folioFN), trading in the new means and new markets (such as purely electronic stock exchange) These are hard technologies. The other is the new "intelligence technology", such as derivatives pricing model, the new Risk (VaR) and management systems, the new valuation techniques (such as real options), numerical simulation methods and means of development, also contributed to the Many of the popular new contract. In the financial engineering to do is to learn about these things. If there are no Black, Scholes and Merton, who contributed many derivative products may have so far not occur. …… If this world is perfect (Perfect), that is, no tax, control, asymmetric information, transaction costs, the risk of moral hazard if the market is completely (Complete), that is, the existing securities can cover (Span) all natural state ; Then there is no need of financial innovation. As the two "if" are impossible, and therefore the financial innovation is the eternal theme.
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