Chapter 2 Flashcards
Option
Grants the holder the right to buy or sell a certain quantity of an underlying asset at a set price for a set period of time
To determine which country to invest in:
Evaluate risk if country by analyzing Political environment Economic trends Fiscal policy Monetary policy
Call
The option to buy an underlying asset
Put
Option to sell an underlying asset at set price
Future
Contract in which the seller agrees to deliver a specified commodity or financial instrument at a specified price in the future
Tsx Toronto stock exchange
Lists common and preferred shares, some convertible bonds income trusts and ETFs
Tsx venture exchange
Lists shares if new and emerging companies and some debentures (bonds)
Montreal exchange
Lists equity futures and options
Canadian national stock exchange
Lists alternative equity markets to the tsx venture exchange for emerging companies
ICE futures Canada
Trades agriculture futures and options
Money market
For short term securities, primarily debt securities with less than a year to maturity.
Include - treasury bills, commercial paper, and bankers acceptances
Long term capital market
Securities that have a remaing life or maturity of more than a year
Derivative
A financial contract between two parties whose value is dependant upon the value of some other asset. Used to hedge against stock or bond price decline
Foreign exchange market
Market for different currencies
Most foreign exchange takes place within banks
Intermediaries can be divided into 2 categories
Deposit taking institution- banks and trust companies that pool deposits together then invests the cash
Non deposit taking- life insurance company- pools together premiums from policies then invests the premiums
