LSP FB B2 - Unit 3: FINANCIAL INSTRUMENTS

Arbitrage

the practice of buying an asset in one market and simultaneously selling it in another to profit from price differences.

Bill of exchange

a written order from one party to another to pay a specified amount on a set date, often used in international trade.

Bond

a fixed-income financial instrument that represents a loan made by an investor to a borrower, usually a corporation or government.

Call option

a financial contract that gives the holder the right (but not the obligation) to buy an asset at a specified price before a certain date.

Certificate of deposit (CD)

a savings instrument issued by banks with a fixed interest rate and maturity date.

Commodity

a basic good or raw material, such as oil, gold, or wheat, that can be traded in markets.

Crisis

a severe financial or economic downturn that disrupts markets, institutions, or economies.

Decentralized finance (DeFi)

a financial system based on blockchain technology that allows peer-to-peer transactions without intermediaries like banks.

Democratize

to make financial markets or investment opportunities accessible to a wider population.

Dynamic

constantly changing or evolving, often used to describe financial markets or economic conditions.

Entity

an organization or individual that operates in financial markets, such as a company, government, or institution.

Equity

ownership in a company, often represented by shares of stock, or the value of an asset after deducting liabilities.

Expansion

a phase in the economic cycle characterized by growth in output, employment, and investment.

Financial ecosystem

the interconnected network of financial institutions, markets, instruments, and regulations that support economic activity.

Future

a financial contract obligating the buyer to purchase or the seller to sell an asset at a predetermined price on a future date.

Growth

an increase in value, size, or economic activity, often measured in terms of GDP, revenue, or investment returns.

Hedge

a strategy used to reduce financial risk by taking offsetting positions in related securities or markets.

Investor sentiment

the overall attitude of investors toward market conditions, which influences buying and selling decisions.

Leverage

the use of borrowed money to amplify potential returns on an investment.

Livestock

farm animals such as cattle, sheep, and pigs, which can be traded as commodities in financial markets.

Maturity

the date on which a financial instrument, such as a bond or loan, becomes due for repayment.

Mitigate

to reduce or minimize financial risks or negative impacts.

Mutual fund

an investment vehicle that pools money from multiple investors to buy a diversified portfolio of assets.

Obligation

a legal or financial duty to repay a debt or fulfill a contract.

Option

a financial contract that gives the holder the right, but not the obligation, to buy or sell an asset at a specified price before a set date.

Physical asset

a tangible item with financial value, such as real estate, gold, or machinery.

Put option

a financial contract that gives the holder the right (but not the obligation) to sell an asset at a specified price before a certain date.

Sophisticate

to make a financial product or strategy more advanced or complex.

Speculation

the practice of making high-risk financial transactions with the hope of significant returns.

Steady income

a reliable and consistent flow of earnings, often from fixed-income investments, salaries, or rental properties.

Stock

a share in the ownership of a company, representing a claim on part of its assets and earnings.

Swap

a financial contract in which two parties exchange cash flows or liabilities, often related to interest rates or currencies.

Tokenization

the process of converting real-world assets into digital tokens on a blockchain.

Volatility

the degree of variation in the price of a financial asset, reflecting market uncertainty or risk.