Main content:
. Interest rate bond investment strategy: In the short term, as the market's expectations for monetary policy easing gradually cools down, coupled with the economic data in a window period, the market without incremental information drives is in a stalemate again. But as the end of the month approaches, the Federal Reserve interest rate agenda meeting, the Politburo meeting, July PMI data, and the restart of Sino-US negotiations will all affect the market one after another, and market volatility will increase again. When various signals are still unclear, the long-term interest rate uncertainty is relatively high, while the short-term interest rate benefits from the overall stability of the capital market, and the allocation value is further highlighted.
html Inflation in 17 still has a risk of exceeding expectations. Since entered July, although the strong fruit prices in the previous period have fallen month-on-month, the year-on-year growth rate has continued to rise as the price decline is slower than the same period last year; vegetable prices rebounded month-on-month due to the large-scale rain in the south, and the year-on-year growth rate has further increased; pork prices continue to rise, and the year-on-year increase has further expanded; poultry and egg prices have emerged, and egg prices have risen ahead of schedule, and the year-on-year growth rate has risen sharply. Overall, although the base effect has a certain negative impact on CPI in July, considering that the year-on-year increase in food prices is still expanding, the risk of CPI exceeding expectations in July is still worthy of vigilance. Specifically:
pig price is still accelerating. html Since July, pork prices have continued to accelerate their upward trend, with year-on-year growth rates further rising compared with last month. The continuous decline in stocks caused by the African swine fever epidemic coupled with frequent heavy rains and floods in the south continue to affect the supply of live pigs, and pork prices show an accelerated rise in the off-season. Vegetable prices rose first and then fell, and the overall increase expanded. In early and mid-July, due to the continued rainy weather in the south, vegetable prices rose more than seasonally, and the year-on-month growth rate was further higher than last month. Although the weather in the south has improved since the second half of the year and the high temperatures across the country are generally beneficial to vegetable growth and transportation, and vegetable prices have fallen, but throughout the month, the average year-on-year increase in vegetable prices has continued to expand, which will still have a boosting effect on CPI. Although the price of fruits fell at a high level, the year-on-year increase is still expanding. Although has seen a significant decline in fruit prices since July as the summer seasonal fruits are launched on the market, the absolute level of fruit prices is still relatively high, and the decline in fruit prices in July is in line with seasonal laws, and the base also fell significantly in the same period last year, so the price of fruits in July rose instead of falling year-on-year. Egg prices rose more than seasonal to season, which is a new change in food prices in July. The most significant new change in html food prices in 27 came from egg prices, both rising significantly from the previous month on month. On the one hand, the sharp rise in egg prices is related to the substitution effect of brought about by the rise in pork prices. Consumers increase their consumption of eggs and lead to an increase in demand; on the other hand, it is also related to the general high temperature in the north since July, and laying hens entering a recurring incubation period, resulting in a decrease in egg production and a significant decline in supply.
To sum up, considering that the year-on-year growth rate of major food prices in July generally increased, the food sub-item in July will not decline significantly; the rise in summer prices such as transportation and tourism are also expected to be a certain extent to which hedges the transmission of the decline in commodity prices to CPI, and non-food prices are also difficult to fall significantly. Therefore, we expect that the CPI in July is still expected to remain at a high level of 2.6-2.7%. Looking ahead, although the overall sunny country has been good since late July, which is conducive to the production and supply of vegetables and fruits, will have a certain negative impact on prices and will be conducive to the decline of CPI, but considering the accelerated rise in beef, mutton and egg prices caused by the accelerated rise in prices of beef, mutton and eggs, it will largely hedge the negative impact of the decline in prices of vegetables and fruits. There is not much room for a significant decline in food prices, and the average CPI value in the third quarter is still expected to remain at around 2.5%.
2. Credit bond market outlook: The financing interest rate of urban investment platforms has declined
Since this year, with the breaking of peers' beliefs in the bond circle, the only remaining urban investment belief in the bond circle has also been in danger with the various behaviors of urban investment bond issuers in June and July. This daily report will use the past to learn from the present and analyze the issuance and inventory of municipal bonds in the past five years to make a brief review of municipal bonds.First, we counted the existing municipal bonds and public fiscal revenues in each province. Secondly, we analyzed the total number of urban investment platforms in the past five years and the existence of urban investment bonds at the end of each year. Again, by analyzing the issuance of municipal bonds in the past five years, we can find that the annual issuance amount fluctuates to a certain extent, but in terms of net financing amount, the net financing amount of municipal bonds in 2017 showed a significant decline. Finally, we analyzed the issuance of municipal bonds in various provinces in the first half of this year.
To sum up, the issuance volume of municipal bonds is still relatively large, but the total financing cost is gradually declining, which may reduce the debt repayment pressure of municipal bonds to a certain extent. It should be noted that under the environment of structural deleveraging, the financing capacity of urban investment issuing entities has differentiated, and the financing costs of some issuing entities may further increase. At the same time, the financing costs of some issuing entities that refinancing by borrowing new funds may also increase, which may increase their debt repayment pressure.
. Interest rate market outlook: Inflation in July still has a risk of exceeding expectations
On Thursday, the bond market trading was very light. In the early trading, affected by the net liquidity recovery of the central bank's open market, the capital market tightened further compared with yesterday. In the afternoon, due to the rebate of deposit reserves, the capital market gradually became loose. The overall interest rate of current bonds rose and fell, with little change. The medium and long-term interest rates fell slightly, while the short-term one-year interest rate rebounded slightly. In addition to the rise and fall in the afternoon, the Treasury futures fluctuated narrowly and closed slightly higher. In the later period, we will pay attention to :
html Inflation in January still has a risk of exceeding expectations. Since entered July, although the strong fruit prices in the previous period have fallen month-on-month, the year-on-year growth rate has continued to rise as the price decline is slower than the same period last year; vegetable prices rebounded month-on-month due to the large-scale rain in the south, and the year-on-year growth rate has further increased; pork prices continue to rise, and the year-on-year increase has further expanded; poultry and egg prices have emerged, and egg prices have risen ahead of schedule, and the year-on-year growth rate has risen sharply. Overall, although the base effect has a certain negative impact on the July CPI, considering that the year-on-year increase in food prices is still expanding, the risk of CPI exceeding expectations in July is still worthy of vigilance. Specifically:
pig price is still accelerating. html Since July, pork prices have continued to accelerate their upward momentum. As of the 25th, the average pork wholesale price average rose by 8.4% month-on-month and 35.4% year-on-year, both further up from the previous month. The continuous decline in stocks caused by the African swine fever epidemic coupled with frequent heavy rains and floods in the south continue to affect the supply of live pigs, and pork prices show an accelerated rise in the off-season. Looking ahead, with the peak season for pork consumption gradually approaching in the second half of the year, the imbalance between supply and demand caused by the decline in stocks will further intensify, and pig prices will face continuous upward pressure in the second half of the year.
Vegetable prices rose first and then fell, and the overall increase expanded. html In early and mid-July 2020, vegetable prices rose beyond seasonal levels due to the continued rainy weather in the south. As of the 25th, the average average wholesale price of 28 key monitored vegetables rose by 6.7% month-on-month and 15.3% year-on-year, all of which rose further from the previous month. Although the weather in the south has improved since the second half of the year and the high temperatures across the country are generally beneficial to vegetable growth and transportation, and vegetable prices have fallen, but throughout the month, the average year-on-year increase in vegetable prices has continued to expand, which will still have a boosting effect on CPI.
fruit price fell at a high level, but the year-on-year increase is still expanding. Although has seen a significant decline in fruit prices since July as the summer seasonal fruits are launched on the market in a large scale, the price of fruits has declined significantly since July, as the absolute level of fruit prices is still relatively high, and the decline in fruit prices in July is in line with seasonal laws, the base also fell significantly in the same period last year. Therefore, the price of fruits in July has not decreased year-on-year. As of the 25th, the average average wholesale price of seven key monitored fruits fell by 4.9% month-on-month, but rose by 54.3% year-on-year, and the year-on-year growth rate has further increased compared with the previous month, which will still have a positive boost to the July CPI.
Egg prices rose more than seasonal to the new changes in food prices in July. The most significant new change in 7 food prices came from egg prices. As of the 25th, the average average wholesale price of eggs rose by 8.2% month-on-month and 20.3% year-on-year, both of which were significantly higher than the previous month.On the one hand, the sharp rise in egg prices is related to the substitution effect brought about by the rise in pork prices. Consumers' increased consumption of eggs has led to an increase in demand; on the other hand, it is also related to the general high temperature in the north since July, and laying hens entering a recurring incubation period have led to a decrease in egg production and a significant decline in supply.
To sum up, considering that the year-on-year growth rate of major food prices in July generally increased, the food sub-item in July will not decline significantly; the rise in summer prices such as transportation and tourism are also expected to hedge the transmission of commodity prices to CPI to a certain extent, and non-food prices are also unlikely to fall significantly. Therefore, we expect that the CPI in July is still expected to remain at a high level of 2.6-2.7%. Looking ahead, although the overall sunny country has been good since late July, which is conducive to the production and supply of vegetables and fruits, will have a certain negative impact on prices and will be conducive to the decline of CPI, but considering the accelerated rise in beef, mutton and egg prices caused by the accelerated rise in prices of beef, mutton and eggs, it will largely hedge the negative impact of the decline in prices of vegetables and fruits. There is not much room for a significant decline in food prices, and the average CPI value in the third quarter is still expected to remain at around 2.5%.
2. Credit market outlook: The financing interest rate of urban investment platforms has declined
Since this year, with the breaking of peers' beliefs in the bond circle, the only remaining urban investment belief in the bond circle has also been in danger with the various behaviors of urban investment bond issuers in June and July. In this daily report, we will use the past to learn from the present and analyze the issuance and inventory of municipal bonds in the past five years to make a brief review of municipal bonds.
First of all, we counted the existing municipal bonds and public fiscal revenues in each province. Through Figure 8, judging from the existence of municipal bonds, the public budget revenue of most provinces can basically cover the current inventory of municipal bonds. But in addition to municipal bonds, local government often issue local bonds, so if local debts are added, perhaps the debt ratio of local government may not be optimistic.
Secondly, we analyzed the total number of urban investment platforms in the past five years and the existence of urban investment bonds at the end of each year. Through Figures 9 and 10, we can find that the total number of bond issuers remained basically stable during the period from 2015 to the first half of 2019, but increased in the first half of 2019 compared with the same period in the first half of 2018. Judging from the balance of municipal bonds over the years, it has basically shown an upward trend in the past five years, which also reflects the increasing serious national debt burden. However, from the perspective of financing costs, the average face value interest rate of existing municipal bonds is gradually decreasing, which may reduce the repayment pressure of issuing entities to a certain extent.
Again, by analyzing the issuance of municipal bonds in the past five years, we can find that the annual issuance amount fluctuates to a certain extent, but in terms of net financing, the net financing amount of municipal bonds in 2017 showed a significant decline, which may be related to deleveraging in the overall economic environment. Judging from the maturity in the next five years, the overall debt repayment pressure in 2021 is relatively high, with the debt repayment scale reaching nearly 1.8 trillion yuan.
Finally, we analyzed the issuance of municipal bonds in various provinces in the first half of this year. We found that the financing costs of urban investment in most provinces are gradually declining, which is consistent with the previous findings (the amount of maturity is increasing, and even if the interest rate decreases, the debt repayment pressure is not small). However, it is worth noting that the issuance cost of financing platforms in five provinces or regions is higher than the current face interest rate of urban investment bonds. These five provinces or regions are Hunan, Chongqing, Guizhou, Jilin, Liaoning and Heilongjiang.
To sum up, the issuance volume of municipal bonds is still relatively large, but the total financing cost is gradually declining, which may reduce the debt repayment pressure of municipal bonds to a certain extent. It should be noted that under the environment of structural deleveraging, the financing capacity of urban investment issuing entities has differentiated, and the financing costs of some issuing entities may further increase. At the same time, the financing costs of some issuing entities that refinancing by borrowing new funds may also increase, which may increase their debt repayment pressure.
. Daily market review and learning experience for newcomers20190725
Shanghai Index
Treasury bond futures1909
National Open Active Coupon190210
【9:16】The RMB mid-price was 6.8737, up 123 points, the mid-price of the previous trading day was 6.8860, and the onshore RMB closed at 6.8745 on the previous trading day.
【09:17】The central bank’s open market will not conduct reverse repurchase operations today, and another 100 billion yuan of reverse repurchase expires. The return of statutory deposit reserves for financial institutions can hedge against the impact of factors such as the maturity of the central bank's reverse repurchase. The total liquidity of the banking system is at a reasonable level of abundant level, and no reverse repurchase operations are carried out today.
【10:09】【Ministry of Human Resources and Social Security: 706.2 billion yuan of pension has been invested in the account】The Ministry of Human Resources and Social Security State Information Office stated at the press conference that fund investment operation and supervision and management work has been further promoted. As of the end of June, 706.2 billion yuan of entrusted investment contracts signed by 18 entrusted provinces (autonomous regions and municipalities) have been invested and operated.
【10:26】【Ministry of Human Resources and Social Security: From January to June, 7370,000 new urban jobs were added, completing 67% of the annual target tasks】Ministry of Human Resources and Social Security spokesperson Lu Aihong said at the press conference of the Ministry of Human Resources and Social Security in the second quarter of 2019 that the employment situation in the first half of the year was generally stable. From January to June, 673 html new jobs were created nationwide, completing 67% of the annual target tasks. In June, the national urban unemployment rate was 5.1%, stabilizing at around 5%. At the end of the second quarter, the national urban registered unemployment rate was 3.61%, a year-on-year decrease of 0.22 percentage points.
【11:04】The Ministry of Human Resources and Social Security stated at the press conference of the State Information Office today that the next step will be to carry out the national insurance plan in a solid manner. Do a good job in the central adjustment of the basic pension insurance fund for enterprise employees, and study and formulate policies for small and micro private enterprises to give priority to the participation of work-related injury insurance. Actively promote the entrusted investment of basic pension insurance funds for urban and rural residents. Further implement the policy of reducing social insurance premiums. At the same time, ensure that the pension is paid on time and in full. Strengthen social insurance management services. Explore the digital transformation of social security management, promote the application of electronic social security cards, and expand the "online" service content and channels for work-related injury insurance. Promote the construction of a credit system in the social security field.
【11:05】Overnight shibor was 2.6280%, up 14.70 basis points; 7-day shibor was 2.6420%, up 8.10 basis points; 3-month shibor was 2.6250%, up 2.6250%, the same as before.
【12:09】【Ministry of Industry and Information Technology: The cumulative mobile Internet traffic in the first half of the year reached 55.4 billion GB】The Ministry of Industry and Information Technology announced the economic operation of the communications industry in the first half of 2019. Data shows that in the first half of the year, the three basic telecommunications companies achieved fixed communications business revenue of 212.5 billion yuan, a year-on-year increase of 9.8%, accounting for 31.6% of the telecommunications business revenue; and achieved mobile communications business revenue of 459.6 billion yuan, a year-on-year decrease of 4%, accounting for 68.4% of the telecommunications business revenue.
【12:41】【Vice President of China Rail Transit Association: The investment scale of more than 400 billion yuan of urban rail in China is expected to continue】 Zhou Xiaoqin, executive vice president of China Urban Rail Transit Association, pointed out at the forum that China's urban rail transit has now entered a stage of high and stable development. The scale of more than 6,000 kilometers under construction, 400 billion to 500 billion yuan/year investment scale, and more than 800 kilometers/year completion and operation scale will continue for a period of time.
【15:04】【Ministry of Commerce: The twelfth round of high-level Sino-US economic and trade consultations will be held in Shanghai from July 30 to 31】The spokesperson of the Ministry of Commerce , Gaofeng, revealed at a regular press conference this afternoon that in order to implement the consensus reached by the two heads of state meeting in Osaka, the leaders of China and the United States will meet in Shanghai, China from July 30 to 31, and hold the twelfth round of high-level Sino-US economic and trade consultations on the basis of equality and mutual respect.
【15:15】【Ministry of Commerce: Restarting economic and trade consultations has no direct relationship with trade procurement】On July 25, the spokesperson of the Ministry of Commerce Gao Feng said that in order to better meet domestic market demand, some Chinese companies are willing to continue to import some agricultural products from the United States, and have inquired about prices from US suppliers and will sign commercial purchase contracts. The relevant procurement is decided independently by the enterprises and carried out in accordance with market rules. Restarting economic and trade consultations is an important consensus reached by the two heads of state meeting in Osaka and has no direct relationship with trade procurement. China has great potential for market demand for high-quality agricultural products.The State Council Tariff Commission will study some agricultural product exclusion issues in accordance with relevant regulations, and will organize relevant experts to evaluate the tariff exclusion applications submitted by enterprises.
【15:20】【The Ministry of Industry and Information Technology, the National Development and Reform Commission, and the Ministry of Ecology and Environment issued a document requiring that new casting capacity be strictly prohibited in key areas】The notice pointed out that it is strictly forbidden to strictly control the source of casting construction projects and that new casting capacity construction projects are strictly prohibited. High-end casting construction projects newly built or renovated and upgraded in key areas must strictly implement equal or reduced replacement, and the capacity replacement plan shall be submitted to the local provincial industrial and information technology authorities. Provincial industrial and information technology authorities in key areas should work with the development and reform and ecological environment authorities to update and announce the foundry capacity list in their regions on an annual basis, and resolutely review the project capacity replacement plan in accordance with the law and regulations to prevent fraud and eliminate new capacity risks.
【15:49】The General Administration of Customs recently issued the "Announcement on the Carrying out Bonded Delivery Business of Natural Rubber Futures", which clarified the regulatory requirements of customs for bonded delivery of natural rubber futures. This is the second time that the General Administration of Customs has issued a special business announcement on international futures products after crude oil futures.
【16:27】【Ministry of Commerce: China's investment in the United States fell by about 20% year-on-year in the first half of the year】On July 25, the Ministry of Commerce held a regular press conference. Gao Feng, spokesperson of the Ministry of Commerce, said at the press conference that according to statistics from the Ministry of Commerce, China's non-financial direct investment in the United States reached US$1.96 billion in the first half of 2019, a year-on-year decrease of about 20%. Overall, China's investment in the United States has shown a gradual decline since last year. For some time, the United States has increased its review of Chinese companies' investment in the United States on the grounds of so-called national security, and has arbitrarily expanded the scope of review, objectively restricting Chinese companies' investment in the United States. At the same time, the US abuse of national security review has brought great uncertainty and instability to the US investment environment, seriously affecting investors from various countries, including Chinese companies, in U.S. investment.
Market summary:
Today's funds, the central bank's open market did not conduct reverse repurchase operations today, and another 100 billion yuan of reverse repurchase expired, achieving a net withdrawal of 100 billion yuan on the same day. Judging from the capital sentiment index, the early trading session was tight and began to ease in the afternoon, reaching 43 as of 16:00, which was obviously loose. Today, the stock market opened low and then fluctuated wide, closing higher at 0.48%. In terms of the bond market, today's Treasury futures continued to fluctuate after opening high. In the afternoon, affected by the loose sentiment of the capital side, it rose for a short period of time and closed up at 0.03%. Today's market sentiment is relatively stalemate, and interest rates have no clear direction. In the future, we should pay attention to the impact of changes in domestic funding policies and the impact of progress in Sino-US trade negotiations.
Today's study:
1. Stock repurchase
Stock repurchase refers to the act of a listed company using cash and other means to repurchase a certain amount of shares issued by the company from the stock market. After the stock repurchase is completed, the company can cancel the repurchased shares. However, in most cases, the company retains the repurchased shares as "treasury shares" and is still issued shares, but does not participate in the calculation and distribution of earnings per share. Treasury shares can be used for other purposes in the future, such as issuing convertible bonds, employee benefits plans, etc., or selling them when funds are needed.
The motivation for stock repurchase
In summary, there are mainly five aspects:
1. Prevent mergers and acquisitions of other domestic and foreign companies.
Take the United States as an example. After entering the 1980s, especially since 1984, due to the prevalence of hostile mergers and acquisitions, many listed companies have made great efforts to enter the stock market and repurchase their own stocks to maintain control. Typical examples are: in 198html, Philippe Oil Company used US$8.1 billion to repurchase 81 million shares of the company's shares; in 1989 and 1994, Exxon Oil Company used US$700 million and US$700 million of the company's shares respectively. For example, in Japan, from the late 1960s to the early 1980s, in order to prevent domestic enterprises from being enfeoffed by foreign capital, the business community carried out the famous "stable shareholder work" - the employee shareholding system and the management staff shareholding system.The former refers to the system in which an enterprise provides certain preferential or financial assistance to employees to purchase and hold their own shares and rewards employees for their shareholding; the latter refers to the system in which enterprises give senior management the right to subscribe to their own shares. The purpose is to improve the sense of responsibility of managers and ensure outstanding talents in the company. Allowing enterprises to repurchase their own shares under certain conditions is a prerequisite for establishing an employee shareholding system and a management personnel shareholding system and maintaining corporate control. Because of this, in the 1980s, while European and American countries were amending the Company Law, Japan also revised the Company Law accordingly and relaxed the restrictions on enterprises to repurchase their own shares.
2. Revitalize the stock market.
198htmlThe New York stock market plunged on October 19, 77, and the stock market was in turmoil. From then on, the main motivation for US listed companies to repurchase their own shares is to stabilize and increase the company's stock price and prevent operating crises caused by the plummeting stock price. According to statistics, within two weeks, 650 companies issued plans to repurchase their own stocks in large quantities, with the purpose of curbing the stock price plummeting and stimulating the stock price rebound.
3. Maintain or increase the earnings per share level (that is, give shareholders a relatively high return) and the company's stock price to reduce operating pressure.
For example, IBM, which experienced a period of rapid growth in the 5660s, experienced a large amount of cash surplus in the mid-1970s, with a cash surplus of US$6.1 billion at the end of 1976 and US$5.4 billion at the end of 1977. Due to the lack of attractive investment opportunities, IBM spent a total of US$1.4 billion to buy back its shares in 1977 and 1978 while increasing its cash dividend (the dividend payment rate was 54% in 1978, while the dividend payment rate was only 1% to 2% in 1977 and 1978. According to statistics, during the period of 1985-1989, IBM's funds used to repurchase its own shares reached US$5.66 billion, and a total of 47 million shares were repurchased, with an average dividend payment rate of 56%. It is also understood that during the 1975-1986 period, United Telecom Equipment Company has adopted a cash dividend policy for stock repurchase, which has increased the company's stock price from US$4 per share to US$35.5 per share. Coincidentally, in the mid-1980s, many Japanese companies also entered the mature stage. According to the corporate development theory, once the company enters the mature stage, it no longer unilaterally pursues increasing equipment investment and expands the scale of the enterprise, but pays more and more attention to the efficient operation of the remaining funds. However, how to use surplus funds efficiently became an important issue facing Japanese companies at that time. Just at this time, the United States' HBOCO. The company used the remaining funds to repurchase 26% of the issued shares. Affected by this, many Japanese listed companies have also begun to use their remaining funds to repurchase their company's shares.
4. Recapitalization.
means large-scale debt borrowing is used to repurchase stocks or pay special dividends, thereby rapidly and significantly increasing the proportion of long-term debt and financial leverage and optimizing the capital structure. Recapitalization often occurs in companies with a strong competitive position and a stable growth stage of operations, but a long-term debt ratio is too low. Since such companies have considerable reserves of underused debt financing capabilities, increasing financial leverage can optimize the company's capital structure, reduce the company's overall capital cost, increase the company's value, and thus create value for shareholders according to the financing decision-making criteria that match the risk of cash inflows expected by assets. At the same time, it also helps prevent hostile mergers and acquisitions attacks. Because in an effective financial market environment, companies with a large amount of unused debt financing capabilities are often susceptible to favor and attacks from hostile M&As.
5. Other considerations.
According to Article 71 of the German Stock Law, enterprises are allowed to repurchase the company's shares within 10% of the capital under specific circumstances. The so-called specific situation refers to: 1) when avoiding major losses; 2) when providing them to practitioners; 3) when canceling stocks based on capital reduction resolutions; 4) when stock inheritance.198htmlThe UK "Company Act" of 71 stipulates that the main motivations of enterprises to repurchase their own shares are: 1) return the remaining funds to shareholders; 2) increase the value of the stock; 3) curb the decline in stock prices; 4) achieve the goal of capital composition; 5) prevent the company from being swallowed; 6) flexibly use surplus funds as an important means of corporate securities issuance strategies. As for France, enterprises are allowed to repurchase their own shares under the following specific circumstances: 1) for the purpose of market adjustment; 2) provide to practitioners; 3) inheritance; 4) according to court judgments; 5) implement capital reduction. In Japan, under the following circumstances, enterprises can also repurchase their own shares: 1) to make the shares issued at the current price smoothly absorbed by investors; 2) to accept debt repayment, etc., and to exercise the company's rights; 3) when the unit is not satisfied with the right to claim stock and the right to purchase stocks that oppose shareholders.
2. Volatility: It is the degree of volatility of the price of financial assets, a measure of uncertainty in the return on assets, and is used to reflect the risk level of financial assets. The higher the volatility, the more violent the volatility of the price of financial assets, the stronger the uncertainty of the return on assets; the lower the volatility, the smoother the volatility of the price of financial assets, the stronger the certainty of the return on assets.
Explained in an economic sense, the main reasons for volatility come from the following three aspects:
1. The impact of macroeconomic factors on a certain industrial sector, namely the so-called systemic risk;
2. A specific event impacts on a certain enterprise, namely the so-called non-systemic risk;
3. The effect of changes in investors' psychological state or expected on stock prices. Classification of
volatility:
1. Actual volatility
Actual volatility is also called future volatility. It refers to the measurement of the volatility of the return on investment during the valid period of options . Since return on investment is a random process, the actual volatility is always an unknown number. In other words, the actual volatility cannot be calculated accurately in advance, and people can only obtain its estimated value through various methods.
2. Historical Volatility
Historical Volatility refers to the volatility shown by the return on investment in the past period of time, which is reflected by the historical data of the market price of the underlying asset over the past period of time (i.e. the time series data of St). That is to say, the corresponding volatility data can be calculated based on the time series data of {St}, and then the standard deviation of the return rate can be estimated using statistical inference methods to obtain the estimated value of the historical volatility. Obviously, if the actual volatility is a constant that does not change over time, then historical volatility may be a good approximation of the actual volatility.
3. Predicted volatility
Predicted volatility is also called expected volatility. It refers to the result obtained by using statistical inference methods to predict the actual volatility, and use it in option pricing model to determine the theoretical value of the option. Therefore, predicted volatility is the volatility that people actually use when theoretically pricing options. This means that the volatility used when discussing option pricing issues generally refers to predicted volatility. It should be noted that predicted volatility does not equal historical volatility, because the former is people's understanding and understanding of actual volatility. Of course, historical volatility is often the basis of this theory and understanding. In addition, people's predictions of actual volatility may also come from other aspects such as empirical judgment.
4 and implicit volatility
implicit volatility is the basis for investors in options markets to understand the actual volatility when trading options, and this understanding has been reflected in the pricing process of options. In theory, it is not difficult to obtain the magnitude of implied volatility. Since the option pricing model gives a quantitative relationship between the option price and the five basic parameters (St, X, r, T-t and σ), as long as the first 4 basic parameters and the actual market price of the option are substituted as known quantities into the option pricing model, the only unknown quantity σ can be solved from it, and its size is the implicit volatility. Therefore, the implicit volatility can be understood as the expectation of the actual market volatility. What the option pricing model requires is the actual volatility of the underlying asset price during the option's validity period.Compared with the current period, it is an unknown quantity. Therefore, it is necessary to replace it with predicted volatility. Generally, historical volatility estimates can be simply used as predicted volatility. However, a better method is to use a method combining quantitative analysis and qualitative analysis, historical volatility as the initial predicted value, and continuously adjust and correct the volatility based on quantitative data and newly obtained actual price data to determine the volatility.
