CISI Introduction to Securities and Investments Chapter 5

What is the money market?

A market for short-term borrowing and lending, typically under one year.

What are money market instruments?

Short-term debt securities such as Treasury bills, certificates of deposit, and commercial paper.

What is a Treasury bill?

A short-term government security issued at a discount and redeemed at face value.

What is a certificate of deposit (CD)?

A fixed-term deposit issued by banks paying a set rate of interest.

What is commercial paper?

An unsecured, short-term debt instrument issued by corporations to meet funding needs.

What is a repo (repurchase agreement)?

A short-term borrowing arrangement where securities are sold and repurchased later at a higher price.

What is the interbank market?

A market where banks lend to and borrow from each other, usually overnight.

What is SONIA?

Sterling Overnight Index Average – the UK’s benchmark rate for overnight unsecured transactions.

What is the FX market?

The global market for buying and selling currencies.

What is a spot FX transaction?

An agreement to exchange currencies within two business days.

What is a forward FX transaction?

A contract to exchange currencies at a fixed rate on a future date.

What is the exchange rate?

The price of one currency in terms of another.

What is appreciation of a currency?

An increase in the value of one currency relative to another.

What is depreciation of a currency?

A decrease in the value of one currency relative to another.

What is the bid-ask spread?

The difference between the price a dealer will buy and sell a currency.

What is a currency hedge?

A strategy used to reduce the risk of exchange rate movements.

What is the Bank for International Settlements (BIS)?

An international financial organisation that promotes global monetary and financial stability.

What is a cryptocurrency?

A digital currency secured by cryptography, operating on decentralised blockchain networks.

What is blockchain?

A distributed digital ledger that records transactions across many computers securely and transparently.

What is Bitcoin?

The first and most widely recognised cryptocurrency, introduced in 2009.

What is a CBDC?

Central Bank Digital Currency – a digital form of a country’s official currency.

What are the main risks of cryptocurrencies?

High volatility, lack of regulation, and potential for fraud or loss.

What is the property market?

A market where land, buildings, and real estate assets are bought, sold, or rented.

What is residential property?

Property used for housing, such as houses and apartments.

What is commercial property?

Property used for business purposes, such as offices, shops, and warehouses.

What is a REIT?

Real Estate Investment Trust – a company that owns and manages income-generating properties.

What are commodities?

Raw materials or primary products that can be traded, such as oil, gold, and wheat.

What are the two main types of commodities?

Hard commodities (metals, energy) and soft commodities (agricultural products).

What are futures contracts?

Agreements to buy or sell a commodity or asset at a predetermined price on a future date.

What are alternative investments?

Non-traditional assets like hedge funds, private equity, and collectibles.

What is a hedge fund?

A pooled investment fund using diverse strategies to achieve higher returns, often with greater risk.

What is diversification?

Spreading investments across asset classes to reduce overall risk.