Chapter 1 - Securities Flashcards
What is a security?
A financial instrument that represents ownership (equity), a creditor relationship (debt), or rights to ownership (derivatives).
What is an ordinary share?
A type of equity security that represents ownership in a company and entitles holders to dividends and voting rights.
What are preference shares?
Shares that provide fixed dividends and priority over ordinary shares in case of liquidation but usually have no voting rights.
What is a bond?
A debt security in which the issuer owes the bondholder a debt and is obligated to pay interest and return the principal.
What is a Eurobond?
An international bond issued in a currency different from that of the country where it is issued.
What are warrants?
Financial instruments that give the holder the right (but not obligation) to buy shares at a predetermined price before expiration.
What is an American Depositary Receipt (ADR)?
A negotiable certificate representing shares in a foreign company, traded on U.S. stock exchanges.
What is a Global Depositary Receipt (GDR)?
A bank-issued certificate that represents shares in foreign companies, traded on multiple international stock exchanges.
What is an Initial Public Offering (IPO)?
The first time a company offers its shares to the public for investment.
What is an ISIN (International Securities Identification Number)?
A unique identifier assigned to securities for tracking and settlement.
What is the difference between exchange-traded and OTC securities?
Exchange-traded securities are listed and traded on formal stock exchanges, while OTC (Over-the-Counter) securities are traded privately.
What is a stock split?
A corporate action that increases the number of shares while reducing the price per share, keeping the total value unchanged.
What is a reverse stock split?
A corporate action that reduces the number of shares and increases the price per share.
What is a rights issue?
A corporate action that allows existing shareholders to buy additional shares at a discounted price.
What are blue-chip stocks?
Shares of large, well-established companies with a history of stable earnings and dividends.
What is a market capitalization?
The total market value of a company’s outstanding shares, calculated as share price × total shares.
What is a dividend yield?
The annual dividend payment expressed as a percentage of the stock’s price.
What is a collective investment vehicle (CIV)?
A pooled investment fund that allows investors to collectively invest in a diversified portfolio of securities.
What are Exchange-Traded Funds (ETFs)?
Investment funds traded on stock exchanges that track an index, commodity, or sector.
What is a hedge fund?
An actively managed investment fund that uses various strategies to generate high returns.
What is a mutual fund?
An investment fund that pools money from investors to buy a diversified portfolio of securities.
What is an index fund?
A fund that replicates the performance of a specific market index.
What is algorithmic trading?
The use of automated systems and algorithms to execute trades at high speeds.
What is a Special Purpose Acquisition Company (SPAC)?
A publicly traded company created to acquire or merge with an existing private company.
What are high-frequency traders?
Firms that use powerful computers to execute large volumes of trades in milliseconds.
What is a financial derivative?
A contract whose value is derived from the price of an underlying asset.
What is the purpose of securitization?
To pool assets like mortgages or loans into tradable securities.
What are convertible bonds?
Bonds that can be converted into a predetermined number of shares in the issuing company.
What is the role of a clearinghouse?
To facilitate the settlement of securities transactions and reduce counterparty risk.
What is a bid-ask spread?
The difference between the highest price a buyer is willing to pay and the lowest price a seller is willing to accept.
