Markets

Question 1

Primary Market:

Answer 1

A formal organization where an issuer, through Public Offering, offers financial securities to be acquired by the investors. The company receives the money.

Question 2

Secondary market

Answer 2

The sector of the financial market where the buying and selling of previously issued securities or financial instruments takes place.

Question 3

Underwriter:

Answer 3

A financial institution that helps the company issue shares for the first time. Sets the price for the IPO.

Question 4

Services of the underwriter: Due diligence

Answer 4

Process of througly analyzing a company to verify information.

Question 5

Services of the underwriter: Valuation

Answer 5

Discounted Cash Flow, comparable company analysis (comps), precedent transactions.

Question 6

Services of the underwriter: Roadshow

Answer 6

The promotion and sell of the company, they go with the investors and sell the company.

Question 7

Market Cap:

Answer 7

The value that the market is giving to the company. Value of the company. Market cap = Price per share * total of shares

Question 8

Leaving money on the table:

Answer 8

Challenge of valuating the shares properly.
How money they “lost” if the price goes up. The company is undervalued.

Question 9

Stock exchange

Answer 9

Place where securities are traded.

Question 10

Functions/Characteristics of Stock Exchange

Answer 10

• Facilitating the trading securities.
• Listing securities trough IPOs
• Ensuring market regulation and fairness
• Provide information of the companies listed, such as their prices and securities.

Question 11

Dealer

Answer 11

• Buy and sells securities for their own account. They own the securities they trade.
• Set the prices at which they are willing to buy (bid) and sell (ask).
• Spread: difference between bid and ask prices.
• Examples: citadel securities, goldman sachs, actinver.

Question 12

Broker:

Answer 12

• Facilitates transactions by acting as an intermediary.
• Do not own securities.
• Earn profits by the fees for arraging the trades.

Question 13

Over the counter (OTC):

Answer 13

• Trading stocks directly between two parties.
• Can also have dealers, brokers, and institutions.
• Less regulated so it might be riskier.

Question 14

Stock Exchanges in Mexico

Answer 14

• Bolsa Mexicana de Valores
• Bolsa Institucional de Valores

Question 15

MILA: Mercado Integrado Latinoamericano

Answer 15

It is an initiative that integrates the stock markets of several Latin American countries to create a larger, more liquid market for investors and companies.
* Chile
* Colombia
* Peru
* Mexico