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Fixed income securities
specific cash flow payments made over a specific period
Derivatice Securities
securities providing payments made depending on other assets
Equity securities
an ownership share of the corporation
Money Markets
involves the purchase and sale of large volumes of very short-term debt products, such as overnight reserves or commercial paper
Capital markets
financial markets that bring buyers and sellers together to trade stocks, bonds, currencies, and other financial assets.
Asset allocation
allocation of investment portfolios across broad spectrum of assets classes
Security Selection
choice in specific securities made in asset class
Efficient markets
refers to the degree to which market prices reflect all available, relevant information. If markets are efficient, then all information is already incorporated into prices, and so there is no way to "beat" the market because there are no undervalued or overvalued securities available.
Primary Markets
new securities issued for cash often through investments
Secondary markets
market for existing agents
Tranches
segments created from a pool of securities—usually debt instruments such as bonds or mortgages—that are divvied up by risk, time to maturity
Banker’s acceptance
a short-term issuance by a bank that guarantees payment at a later time
Euro-dollars
dollar-denominated deposits at a foreign bank or foreign branch of an American bank
SOFR
a benchmark interest rate of dollar-denominated derivatives or loans replacing LIBOR
Treasury Inflation Protected Securities (TIPS)
a type of treasury security issued by the U.S. government that protects investors’ purchasing power (in case of decline)
Agency Issues
conflict between managers and stockholders
Municipal bonds
a tax-exempt bond issued by a state or local government
American Depository Receipts (ADRs)
a negotiable certificate issued by U.S. depository banks that represents the number of shares of a foreign company’s stock
Market Index
index return equals weighted average of return of each security
Call Option
an option to buy assets at an agreed price on or before a particular date. are appealing because they can appreciate quickly on a small move up in the stock price.
Futures Contract
obliges traders to purchase or sell their assets at an agreed-upon price at a specific future date
Name a Market Index and tell what it is
S&P 500 index is a market capitalization index of 500 leading publicly traded companies in the U.S.; market capitalization of companies is adjusted according to the number of stocks available
Initial Public Offering (IPO)
The first sale made when a private company goes public
Shelf Registration (SEC Rule 415)
securities preregistered, offered within 2 years, 24 hour notice, introduced in 1982
Market Order
execute immediately at best price
Price Contingent orders
a limit order to buy or sell a security at a specified price or better. allow a trader to implement a strategy, or multiple positions, once the initial event occurs.
Dealer’s market
traders specialize in particular assets to buy and sell for their own accounts
Designated Market maker
a market maker designated by the exchange to commit its own capital to provide quotes and help maintain a “fair and orderly market” by trading from its own inventory of shares
Buying on Margin
sale of a security with money borrowed in part by a broker
Margin Call
notification from broker that additional funds or liquidated position are needed
Short Sale
occurs when you sell stock you do not own but borrowed through a broker. Investors who sell short believe the price of the stock will fall. If the price drops, you can buy the stock at the lower price and make a profit. If the price of the stock rises and you buy it back later at the higher price, you will incur a loss.
Insider Trading
trading done when based on nonpublic knowledge about the firm
Dark Pools
electronic trading networks when participants anonymously buy or sell large securities. Facilitates block trading by institutional investors who did not wish to impact the markets with their large orders and obtain adverse prices for their trades.
Gross Domestic Product (GDP)
the total monetary or market value of all the finished goods and services produced within a country's borders in a specific time period. Measures total income or total expenditure.
Unemployment Rate
The number of people who are unemployed in the labor market that are actively seeking a job
Inflation rate
the rate at which prices increases in a period of time
Interest rates
the amount charged on top of the principal by a lender to a borrower for the use of assets.
Federal Budget Deficit
when the government spends more than it receives in revenues
Business Cycle
The cycle of when the business expands and contracts
Fiscal policy
the use of government spending and taxing that influences the economy. Two major examples of expansionary fiscal policy are tax cuts and increased government spending. Both of these policies are intended to increase aggregate demand while contributing to deficits or drawing down budget surpluses.
Monetary Policy
comprises the Federal Reserve's actions and communications to promote maximum employment, stable prices, and moderate long-term interest rates
Leading/Lagging indicators
indicators that help business predict the future outcomes or lagging indicators in which you look at past outcomes
Industry Life Cycle
the life cycle when the industry experiences growth or decline of growth. Five stages: development, expansion, growth, maturity, decline
Supply side policy
measures governments take to increase the availability or affordability of goods and services
Startup financing cycle