Investments: Background and Issues

A collection of vocabulary flashcards covering key concepts from the lecture on investments, financial assets, and markets.

Real Assets

Assets used to produce goods and services.

Financial Assets

Claims on real assets or the income generated by them.

Securitization

The pooling of loans into standardized securities backed by loans.

Debt Securities

Financial assets that pay a specified cash flow over a specific period.

Equity

An ownership share in a corporation.

Derivative Securities

Securities providing payoffs that depend on the values of other assets.

Risk-Return Trade-Off

The principle that higher expected returns are associated with higher risk.

Agency Problems

Conflicts of interest that arise in situations where one party is expected to act in another's best interests.

Corporate Governance

The system of rules, practices, and processes by which a firm is directed and controlled.

Sarbanes-Oxley Act (SOX)

Legislation that requires enhanced financial disclosure and governance oversight.

Asset Allocation

The process of dividing investments among different asset categories.

Security Selection

The process of choosing specific securities within an asset class.

Financial Intermediaries

Institutions that connect borrowers and lenders.

Venture Capital

Equity investments made to finance new firms.

Systemic Risk

The risk of breakdown in the financial system, affecting multiple markets.

Credit Default Swaps

Insurance contracts that protect against the risk of default by borrowers.

Dodd-Frank Reform Act

Legislation aimed at reducing risks in the financial system through strict regulations.