OVERVIEW OF CAPITAL MARKET Flashcards
refer to a market where securities such as stocks, bonds, and derivatives are traded among buyers and sellers. These markets play an important role in the economy by facilitating the flow of capital from those who have surplus funds to those who need funds for investment and growth.
CAPITAL MARKET
how companies, governments, and other organizations can raise funds through the issuance and sale of securities.
Raising Capital
how capital markets allow individuals and institutions to buy and sell securities, providing liquidity to the markets.
Providing Liquidity
how capital markets allocate capital to its most efficient use through the interactions between buyers and sellers.
Allocating Capital
how capital markets determine the price of securities and help ensure that the markets are efficient.
Price Discovery
how capital markets encourage savings and investment, which are important drivers of economic growth and development.
Facilitating Savings and Investment:
place where securities that have already been issued and are outstanding are bought and sold. This is where individuals and institutions trade securities, such as stocks and bonds, among themselves.
SECONDARY MARKET
financial instruments that represent ownership in a company (stocks) or a debt owed by a company or government (bonds).
SECURITIES
securities that represent ownership in a pool of real estate assets, such as commercial or residential properties.
Real Estate Investment Trusts (REITs)
is the place where new securities are first offered to the public. Companies, governments, and other organizations can raise funds by issuing and selling securities, such as stocks and bonds, directly to investors.
Primary Market
known as equities, represent ownership in a company.
Stocks
the process by which a privately held company becomes publicly traded by issuing and selling shares of its stock to the public for the first time.
IPO
debt securities that represent a loan made by an investor to a
company or government.
BONDS
Capital markets are made up of a variety of participants
Market Participants
Capital markets are regulated by government agencies to ensure fair and efficient trading, and to protect investors.
Market Regulation:
Companies, governments, and other organizations can raise capital by issuing and selling securities to the public. This process is known as an initial public offering (IPO) for stocks, or an issuance of bonds.
Issuance and Sale of Securities
securities that derive their value from the price of an underlying asset, such as a stock or commodity.
Derivatives
financial instruments that represent ownership in a company (stocks) or a debt owed by a company or government (bonds).
Securities
company seeking to go public hires investment bankers to help it prepare for the IPO.
Preparation
individual investors who buy and sell securities for their own
personal accounts.
Retail Investor
debt securities that are issued by corporations or governments to raise funds. Investors
Bonds
demand generated during the roadshow, the investment bankers set the final price for the stock. This is known as the offering price.
Pricing
On the day of the IPO, the stock begins trading on a stock exchange, and investors can buy and sell the stock just like any other publicly traded security.
Trading
The investment bankers allocate the available shares of stock to their clients, based on their level of interest.
Allocation
firms that buy and sell securities on behalf of their clients, as well as for their own account.
Broker-Dealers
Based on the demand generated during the roadshow, the investment bankers set the final price for the stock.
PRICING
company embarks on a roadshow, during which its executives travel to major cities to meet with potential investors and promote the company and its stock.
ROADSHOW
are large financial organizations, such as pension funds, mutual funds, and insurance companies, that buy and sell securities on behalf of their clients or to meet their own investment objectives
Institutional Investors
Securities and Exchange Commission (SEC) in the United States, are government agencies that oversee and regulate the capital market to ensure that it operates in a fair and transparent manner.
Regulators
individual investors who buy and sell securities for their own
personal accounts.
Retail Investor
Capital markets are made up of a variety of participants,
Market Participants
