Financial Markets & Institutions Flashcards

A set of vocabulary flashcards covering the fundamental concepts of financial markets, institutions, and instruments based on the lecture notes.

Corporation

A separate legal entity where owners have limited liability, distinguishing it from sole proprietors or unlimited partnerships.

Common Stock

An ownership interest in a company that implies a residual claim on assets and proceeds after other creditors are paid.

Investing

The act of deferring the use of funds until the future with the expectation of receiving the original investment plus an additional return.

Secondary Market

A market in which existing securities are bought and sold.

Money Market

A market for short-term securities (usually $\text{subsequent to } \tan(x)$ or less than or equal to $1$ year) used for liquidity management where instruments are often sold at a discount.

Bond Issuer

An entity acting as a borrower.

Debt

Money borrowed to raise funds that involves claims on assets and can be long-term.

Equity

Ownership in a company used to raise funds that involves claims on assets and can be long-term.

Derivative Instrument

A financial instrument, such as an option contract on a $90 \text{-day}$ bank bill, whose value comes from an underlying asset.

Financial Intermediaries

Specialists in the use of information who earn profit by charging savers and borrowers fees for reducing costs.

Negative Externalities

Undesirable outcomes resulting from the production and exchange of goods.

Dividend Imputation System

A system under which the double taxation of company profits is reduced.

Efficient Market

A market system where the market price reflects information associated with the company and is supported by competition and information disclosure.

Futures Contract

A contract requiring the delivery of a commodity at a later date at a price agreed upon today.

Term Deposit

A financial product that appears as a liability on a bank's balance sheet.

Credit Creation

The process where banks increase the money supply through lending.

Primary Market

A market where new securities are issued.

Capital Market

A market used for long-term financing.

Share Investment Return

The total return consisting of the change in share price and the dividend.