CAPITAL MARKETS Flashcards
CMIP -
Capital Market Institute of the Philippines
GSEDs -
Government Securities Eligible Dealers
PDIC -
Philippine Deposit Insurance Corporation
MMMFs -
Money Market Mutual Funds
NAV -
Net Asset Value (NAV)
PSE -
Philippine Stock Exchange
MSE -
Manila Stock Exchange
MKSE -
Makati Stock Exchange
SRO -
Self-regulatory Organization
IPO -
Initial Public Offering
IMM -
Inetrnational Monetary Market
CME -
Chicago Mercantile Exchange
LIBOR -
London Interbank Offered Rate
CPI -
Consumer Price Index
ADAPS -
Automated Debt Auction Processing System
BIS -
Bridge Information Systems
Phisix -
Philippine Stock Index
NHMFC -
National Home Mortgage Finance Corporation
PSA -
Philippine Statistic Authority
PDCI -
Philippine Deposit Insurance Corporation
DBP -
Development Bank of the Philippines
PNB -
Philippine National Bank
GSIS -
Government Service Insurance System
SSS -
Social Security System
WOCCU -
World Council of Credit Union
PIFA -
The Philippine Investment Funds Association
CPPI -
The Chamber of Pawnbrokers of the Philippines, Inc.
was formed from the country’s two exchange stock exchanges.
PSE
- established on aug. 8 1927
MSE
- established on may 27, 1963
MKSE
- granted PSE a self-regulatory organization
JUNE 1998
- are structure through which funds flow.
FINANCIAL MARKETS
facilitate transactions in all types of financial claim
FINANCIAL MARKETS
entitles a credit to receive payment from a debtor in circumstances specified in a contract between them.
FINANCIAL CLAIM
have financial claims on banks where they hold their deposits.
DEPOSITOR
- are at the heart of financial system
FINANCIAL MARKET
entitles a credit to receive payment from a debtor in circumstances specified in a contract between them.
FINANCIAL CLAIM
have financial claims on banks where they hold their deposits.
DEPOSITOR -
- are at the heart of financial system
FINANCIAL MARKET -
CLASSIFICATION OF FINANCIAL MARKET
- Primary and Secondary Market
- Money or Capital Market
financial claims are initially sold by deficit units in primary markets.
PRIMARY MARKETS -
- users of funds raise funds, through new issues of financial instruments such as stocks and bonds.
PRIMARY MARKETS -
consist of underwriters, issuers, and instruments involved in buying and selling original or new issues of securities.
PRIMARY SECURITIES -
- also called merchant banks.
INVESTMENT BANKS
most primary market transactions are done.
INVESTMENT BANKS
guarantees the sale of the issues, but does not intend to hold the shares or bonds in his own account.
UNDERWRITER -
first-time issues for the public
INITIAL PUBLIC OFFERING -
INVESTMENT BANKS PROVIDE THE FOLLOWING SERVICES
- Provide funds in advance
- Give advice to issuing corporations
- Attract the initial public purchasers of the securities
- Act as a market analyst and advisor to the issuing company
- Absorb the risk and cost of creating a market for securities.
once financial instruments are issued in primary markets, they are then traded in secondary markets
SECONDARY MARKETS
form that the primary market sale can take
PRIVATE PLACEMENT -
- are likes used car markets
SECONDARY MARKETS
markets for currently outstanding securities. Previously bought and owned and now being resold.
SECONDARY SECURITIES -
shares held by the public.
OUTSTANDING SHARES/SECURITIES -
- exist for the purpose of marketability or easy selling/transfer of ownership.
SECONDARY MARKET
classified in the balance sheet as cash equivalents.
MARKETABLE SECURITIES -
- financial institutions organized usually as a corporation or a partnership.
SECURITIES DEALER
buy securities as their assets and resell them.
SECURITIES DEALER
- do nont buy their own account.
SECURITIES BROKERS
earnings are mere commissions.
SECURITIES BROKERS
- cover markets for short-term debt instruments, usually issued by companies with high credit standing.
MONEY MARKETS
find the purchashers for the securities that others wish to sell.
SECURITIES BROKERS
- generally have short maturities are highly liquid and have low default risk.
MONEY MARKET INSTRUMENTS
- are the core of money market transactions
DEALERS AND BROKERS
-banks with temporary cash surpluses led commercial banks to set up the money market as auction house for excess reserves.
INTERBANK CALL MARKET
- treated as deposit substitutes.
INTERBANK CALL LOANS
- are credits of one bank to another for a period not exceeding 4 days.
INTERBANK CALL LOANS
alternative ways of getting money from the public other than traditional bank deposits.
DEPOSIT SUBSTITUTES -
- IMM was opened and CME pioneering the trading of international financial derivatives most notably.
MAY 1972
payment process both in the primary and secondary markets for GS traded.
SETTLEMNT OF TRADES -
value based on 100 points per unit.
PRICE OF A GS -
market in which these Eurodollar deposits are traded.
EURODOLLAR MARKET -
- non-formally organized market are another mode of originating GS fro specific investors.
OVER-THE-COUNTER (OTC)
- the rate at which the central bank of country lends money to commercial banks in the event of any shortfall of funds.
REPO RATE
- known as the London Interbank Offered Rate.
EURODOLLAR FUNDS
are US-dollar-denominated CDs in foreign banks,
EURODOLLAR CERTIFICATES OF DEPOSITS -
the official registry of absolute ownership, legal, or beneficial titles.
RoSS -
the increment or interest on an investment in GS.
YIELD -
tender to buy a specified amount of GS by GSED in the primary auction of GS.
NON-COMPETITIVE BID -
tender to buy an amount of GS at an indicated yield rate per anumm.
COMPETITIVE BID -
method in which successful competitive bidders pay the price they have bid.
PRICE DISCRIMINATION OR ENGLISH AUCTION -
method of pegging a uniform coupon rate of T-bond at the stop-out level.
UNIFORM PRICE OR DUTCH AUCTION -
- allow participants to undertake rapid refinancing in the interbank market.
REPO MARKET
sale of securities for cash with a commitment to repurchase them at a specified price at a future date.
REPURCHASE AGREEMENT -
are government securities which mature in less tha a year.
T-BILLS
- are government securities which mature beyond one year.
T-BONDS
is an electronic mode by which the national government sells government securities to a network of GSED.
ADAPS -
used to produce goods and services to generate revenues.
CAPITAL GOODS -
- markets for long-term securities.
CAPITAL MARKETS
- composed of stock market fro equity or stock securities.
CAPITAL MARKETS
THE CAPITAL MARKET CONSIST OF:
- Securities market; and
- Negotiated(or non-securities) market.
- companies issue common stock or bonds, which are marketable/negotiable, to obtain long-term funds.
SECURITIES MARKET
- the stock price for the first transaction at the start of trading day
OPEN
SECURITIES MARKET IS COMPOSED OF:
- Stock market for equity or stock securities;
- Bond market fro debt securities; and
- Derivate securities market for securities their value from another security
- the lowest stock price for transaction during the day
LOW
serves as the medium or agent of exchange transaction dealing with equity securities.
STOCK MARKET -
- a measure of the price level of the shares listed in the exchange by the indicated category.
STOCK INDEX
- the highest stock price for transaction during the day
HIGH
- the stock price for the last transaction of the day
CLOSE
relationship between the benefits and the cost of the stock.
VALUE OF THE STOCK -
- is the ratio of stock price to earnings per share.
PRICE-EARNIGS (PE) RATIO
- market wheere bonds are issued and traded.
BOND MARKET
CLASSIFICATION OF BOND MARKET
- Treasury notes and bonds market;
- Municipal bonds market; and
- Corporate bonds market
- issued by the government’s treasury. Backed by the full faith and credit of government and are therefore free from risk.
TREASURY NOTES AND BONDS
- important financial instrument for development.
MUNICIPAL BOND (LGU)
- long term bonds issued by private corporation.
CORPORATE BONDS
- legal contract that specified the rights and obligation of bond issuer and bondholders.
BOND INDENTURE
commonly used to describe a type of security which market value is directly related to or derived from another traded security.
DERIVATE -
- refers to the amrket where derivative securities are traded.
DERIVATIVE SECURITIES MARKET
- financial instruments which payoffs are linked to another, previously issued securities.
DERIVATIVE SECURITIES
- allow a farmer to keep his product until some time in the future.
FUTURE CONTRACTS
- does not involve securities, thus called non-securities market.
- results from negotiation between a borrower and a lender.
NEGOTIATED/NON-SECURITIES MARKET
- a company or a person from lending institution, like a bank.
DIRECT LOAN
- someone asks from a parent or a relative is a negotiated loan occurring in a negotiated market.
PERSONAL LOAN
- buyer and seller deal with each other, either directly or indirectly through broker or dealer.
NEGOTIATED MARKET
- can be obtained from a group of banks called a syndicate.
SYNDICATED LOAN
THE NEGOTIATED OR NON-SECURITIES MARKET INCLUDES, BUT IS NOT LIMITED TO, THE FOLLOWING:
- Loan market
- Mortgage market
- Lease MArket
- where a one-on-one transaction takes place between a borrower and a lender.
LOAN MARKET
- where a real property like land, building,and big machineries, among other are used to guarantee or secure big loans.
MORTGAGE MARKET
- where equipment, building, or other property is being leased/rented out to another party.
LEASE MARKET
- owns the property and who is renting the property out
LESSOR
- involves parties and transactions related to loans grabted to households who desire to buy properties.
- CONSUMER CREDIT MARKET
- usually takes the form of character loan, car loan, appliance loan, educational loan, and amomng others.CONSUMER CREDIT - usually takes the form of character loan, car loan, appliance loan, educational loan, and amomng others.
CONSUMER CREDIT
- are the exchanges. Exchanges, whether stock markets or derivatives exchanges,started as physical places where trading took place.
- ORGANIZED MARKET
- less formal. Although often well-organized networks of trading relationships centered on one or more dealers.
- OVER-THE-COUNTER (OTC) MARKET
- where the trading is done by an independent third party matching on orders received to buy and sell a particular security.
- AUCTION MARKET
- buds and offers stipulate both prices and volume and are handled by the third party.
TRADER
- provides the physical and institutional structure through which the money of one country is exchanged for that of another country.
- FOREIGN EXCHANGE MARKETS
- agreement between a buyer and seller that given amount of one currency is to be delivered at a specified rate for some other currency
FOREIGN EXCHANGE TRANSACTION
FOREIGN EXCHANGE MARKET CONSIST OF TWO TIERS
- Interbank or wholesale market
- Client or retail market
- buying and selling is done “on the spot: that is , for immediate delivery and payment.
- SPOT MARKET
- contracts are originated and traded that give the holder right to buy something in the future at a price specified in the contract.
- FUTURE MARKET
- contract’s price is adjusted each day as the price of the asset underlying futures contract changes and as the contract approached expiration.
FUTURE’S CONTRACT
- establish anticipation of a price change
SPECULATORS
- employ futures to reduce the risk from price changes.
HEDGER
- hedgers pass the risk to speculators.
HEDGING
- profits from betting on the direction where an asset will be moving.
SPECULATION
- consist of circular steps leading down to the center of the pit.
TRADING PIT
- position traders, day traders, or scalpers who are specialists on the stock exchanges where they trade for their own account.
PROFESSIONAL TRADERS
- position in the future market based on their expectation about the future direction of prices of underlying assets.
POSITION TRADERS
- position within a day and liquidate it before the day’s end.
DAY TRADERS
- positions for very short period of time, sometimes only minutes,in attempt to profit from this active trading.
SCALPERS
- dealers purchase securities outright, take title to them.
LONG POSITION
- the sale of borrowed security, commodity, or currency, with the expectation that the asset will fall in value.
SHORT POSITION
- involve trading contracts calling the future delivery of financial instruments.
-involve non-standarized underlying assets
- FORWARD MARKET
- break up every trade into a buy and sell transaction and take the opposite side of the transaction.
CLEARING HOUSES
AN OPTION CONTRACT IS DEFINED BY THE FOLLOWING ELEMENTS
- Type (Put or call)
- Underlying Security
- Unit of trade (number of shares)
- Strike price
- Expiration date
- where stocks option are traded.
- OPTION MARKET
- if they are issued by individuals
Calls
- are called warrants
Option
- all option of the same class that also have the same unit trade at the same strike price and expiration date.
OPTION SERIES
- gives the buyer the right t buy an underlying security or futures contract at a strike price.
CALL OPTION
- call option, must pay the writer an upfront fee.
CALL PREMUIM
- are agreements between two parties in exchanging specified periodic cash flows in the future.
- SWAP MARKET
THERE ARE FIVE GENERAL TYPES OF SWAPS
- Interest rate Swaps
- Currency Swaps
- Credit Risk Swaps
- Commodity Swaps
- Equity Swaps
- ready to pay a higher price for an investment regardless of the risk involve.
- RISK-TAKER INVESTORS (BEARD AND PIGS).
- refers to transaction between broker-dealers and large institutions
THIRD MARKETS
- refers to transactions that take place between securities firms and large institutional investors.
FOUTH MARKET
- when faced with two investment alternatives with equal returns but one is riskier than the other.
- RISK-AVERSE INVESTORS (BULLS AND CHICKEN)
- technique used by people who try to profit from the falling price of a stock.
SHORT SELLING
- do not take into account the risks involved in the investment and who are focused only on the expected returns.
- RISK-NEUTRAL INVESTORS
- bullish organization that stokes and develops in the investment character of Filipinos in the Philippine
CMIP
- with maturity of more than one year.
LONG-TEM
- belong to the money market
SHORT-TERM INSTRUMENTS
- belong to the capital market
LONG-TERM INSTRUMENTS
- are assets that will be converted to cash within a period of one year.
CURRENT ASSET
- maturity of one year or less
SHORT-TERM
- have lives longer than a year.
NON-CURRENT ASSETS
- are short-term securities
- paper electronic evidences of debt dealt in the money markets.
- issued by the government and corporations needing short-term funds.
MONEY MARKET INSTRUMENTS
- government issued securities with maturities of less than 91 days, specifically 35 days or 42 days.
CASH MANAGEMENT BILLS
- issued by the bureau of the treasury with 91 day, 182-day and 364-day maturities.
- short term, are zero coupon securities
TREASURY BILLS (T-BILLS)
- long term, are sold only through government securities eligible dealers
T-BONDS
- difference between their purchase price and their face value.
DISCOUNT YIELD OR MARGIN
- is a time draft issued by a bank payable to a seller of goods.
BANKER’S ACCEPTANCE
- issued by a bank is an order for the bank to pay a specified amount to the bearer of the time draft on a given date.
TIME DRAFT
- the buyer has its bank issue a letter of credit on its behalf in favor of the seller.
LETTERS OF CREDIT
- international letter of credit is opened
IMPORTS
- a domestic letter of credit is opened
LOCAL PURCHASE
- a contractual agreement between a bank,
COMMERCIAL LETTER OF CREDIT
is a receipt issued by a commercial bank for the deposit of money.
- bank-issued time deposit that specifies an interest rate and maturity date and is negotiable.
NEGOTIABLE CERTIFICATES OF DEPOSIT -
- are legal contracts that involve the actual sale of securities by a borrower to a lender with a commitment to repurchase the securities at the contract price plus a stated interest charge at a later date.
REPURCHASE AGREEMENTS
- is an agreement involving the purchase of securities by one party to another with the promise to sell them back at a given date in the future.
REVERSE REPURCHASE AGREEMENT OR REVERSE REPO
insured deposit accounts that are usually managed by banks or brokerages and can be convenient place to store money.
MONEY MARKET DEPOSIT ACCOUNTS - PDIC-
- very safe and highly liquid investments, typically paying higher interest than regular savings account.
MONEY MARKET ACCOUNTS
- are investment funds that pool funds from numerous investors and invest in money market instruments.
MONEY MARKET MUTUAL FUNDS
- is an investment company that pools the funds of many individuals and institutional investors.
MUTUAL FUNDS
- invest primarily in shared of stock.
STOCK FUNDS/EQUITY FUNDS -
- invest both in shares of stock and debt instruments
BALANCED FUNDS
- invest in long term debt instruments of governments or corporations.
BOND FUNDS
- invest purely in short term debt instruments.
MONEY MARKET FUNDS
- invest in assets that are expected to reap large capital gains
GROWTH FUNDS
- invest in stocks that regularly pay dividends and in noted and bonds that regularly pay interest
INCOME FUNDS
