Overview Of Assets Flashcards
What is perfect matching
Situation in which all of the liability cash flows are exactly offset by the assets cash inflows, removing all the risk of not being able to meet your liabilities
What sub markets are included in the investment market
Money market
Bond market
Equity market
Property market
Derivatives market
What is the money market
Short term investments
Cash bank deposits
Treasury bills bills of exchange
Commercial paper
What is the bond market
Government issued bonds
Company and parastatal issued bonds
What type of bonds do you get
Fixed interest and index linked
What is the equity market
Shares are traded here
Property market
Real estate / properties are traded
What are derivatives
Instruments such as futures and options which derive value from that of another underlying security are traded
What other popular assets can be bought
Commodities
Alternative investments (hedge funds, private equity and private debt)
Why might one choose investing international over domestic
Matching foreign currency denominated liabilities or to provide diversification
What is the difference between indirect and direct investment
Indirect is the investor owning a portion of a fund that owns assets
Direct is when the individual buys and owns and asset for themselves
Explain Primary vs Secondary market
Primary is where new shares and bonds are issued
Secondary is when these securities/assets are traded amongst investors (allow for daily transactions with assets)
Explain income vs Capital gains
Income is the regular cash flows paid to holders of the assets (dividends , coupons)
Capital gains is the difference between capital value received when asset is sold/matured and the price that was paid to obtain the asset
What does SYSTEM T stand for
Security - risk if default
Yield - return on investment
Spread - volatility or uncertainty of market values
Term - length of period
Expenses - transaction costs (could also be exchange rate)
Marketability and liquidity - the ease with which an asset is bought/sold
Tax
