Financial Markets & Instruments Flashcards
What are capital markets?
Markets for long-term securities like stocks and bonds where companies can raise funds.
What are the two main components of capital markets?
Equity markets (for stocks) and debt markets (for bonds).
What are money markets?
Markets dealing with short-term, highly liquid debt instruments, typically under a year.
What are derivatives markets?
Markets for contracts based on the value of underlying assets, used for hedging or speculation.
What is the foreign exchange (forex) market?
A global market for trading currencies, facilitating international trade and investments.
What are commodity markets?
Markets where raw materials like oil, gold, and agricultural products are traded.
What are over-the-counter (OTC) markets?
Decentralized markets where securities not listed on exchanges are traded directly between parties.
What are stocks (equities)?
Securities representing ownership in a company, entitling shareholders to a portion of profits.
What are common and preferred stocks?
Common stock provides voting rights; preferred stock offers fixed dividends with liquidation priority.
What are bonds?
Debt securities issued to raise capital, with fixed interest payments and return of principal at maturity.
What are options?
Contracts giving the right to buy (call) or sell (put) an asset at a set price before expiration.
What are futures?
Contracts obligating the buyer to purchase or the seller to sell an asset at a future date and price.
What are swaps?
Contracts in which two parties exchange cash flows or financial instruments, like interest or currency swaps.
What are certificates of deposit (CDs)?
Bank time deposits with fixed maturity and interest, offering higher returns than savings accounts.
What is commercial paper?
Unsecured, short-term debt issued by corporations to meet immediate financing needs.
