Categories Flashcards
Asset Class - CASH
Fixed Income - MM (Bonds, Debt Market)
FX - Currencies
Credit Market - Inv grade/high yield Bonds, Junk B, ST commercial paper
Equity Market - Stocks, Indexes, Funds, Private Equity
Asset Class - DERIVATE
Fixed Income - IRS, FRAs, IOS, future, Options
FX - Forwards, IRS
Credit Market - CDS, TRS
Equity M - future, Options, Swaps
Difference - Cash VS Derivative
Buy Shares (OS) VS you only hold positional stocks
Longer Holding period VS future option–> settled maturity
(trans.generational)
Entitle to Dividend VS no RIGHTS
or other corporate benefit
lower Risk VS higher risk - have to settle
longer holding period within a spec. period
sell when P is higher
Investment Purpose VS hedge Risk or speculate
Buy shares (total amount) VS buy lots
fixed margin amount at front
only buy/sell stock of VS buy/sell both
idv. firm (not index)
OTC Market
bilateral - free to choose
Tailor made (less liquid but exotic products)
lack of rules
higher trading/counterparty risk
unlisted stocks (traded directly between dealers - normally since they don`t meet requirements to be listed on Exchange)
Equities which are seldom sold or little interest to institutional investors
normally requires brokerage firm to match B/S prices (or BF may purchase share for own account and sell later)
OTC firm have normally few SH & little equity outstandings
Stock Exchange
more organised way to trade shares
greater liquidity - as it brings more investors together - make it possible to obtain better prices
market is able to obtain/publish prices (inv. can reach more info. available than OTC)
Rules & procedures (ensure parties commitments & degree of qualification)
Primary Market
initial public offering (sells public for first time)
“new issue market” - exchange fir 1st time without any intermediare (exchange)
investors buy securities directly from company issuing
companies will hire investment bankers to obtain commitments from large investors (seeks to sell all of the available securities within short period to meet required volume)
Secondary Market
FTT - free to trade
Investors trade securities among themselves
company doesn´t take part on transaction
Examples - NYSE, LSE; NAsdaq
smaller investors have a chance to trade securities ( being excluded from IPO to to size)
Broker typically purchase security on behalf on investor
–> price fluctuation (cost = commission)
–> volume fluctuation (change in demand)
–> price paid by investor not direct linked to initial price (first issuance)
