Secondary Markets Flashcards
What are zero bonds
Issued at a discount value and repaid at face value no periodic intrest is paid
What are convertible bonds ?
Give investors teh option to convert the bonds into equity at a fixed price
What are two main factors effecting stock price
Stock specific factors ( expectation about tech company, future earning capacity, financial health and management, level of tech etc) and market specific factors ( sentiment towards stock market, political environment etc )
Growth stocks ( payments)
These companies pay little to no dividends and prefer to reinvest their profits into their buissness for future expansions
What is teh bid-ask differance an indicator of ?
Is an indicator of liquidityin a stock ( less differed menas highly liquid)
What does diversification mean ?
It is a risk management strategy that mixes a wide variety of investments within a portfolio. A good investment portfolio has a wide range of asset classes.
What are value stocks ?
These are stocks overlooked by other investors and have hidden value
Bonds vs debentures
State issue debt instruments are called bonds while private issue debt instruments are called debentures
What are derivatives
derivatives are tools that people use to predict how the value of things, like company shares, might change
Where do derivatives get their value from ( considering tehy have no independent value )
The value of derivatives is derived from an underlying asset, which could be almost anything with a fluctuating price. The derivative’s value depends on how the underlying asset’s price changes over time.
futures contracts
they are financial agreements to buy or sell an underlying asset at a predetermined price on a specific future date.
A futures contract is like making a promise to sell your wheat to a buyer at a fixed price, even if the market price goes down. This helps you protect your profits. So, if you agree on a price now and the actual market price falls, you still get the higher price you agreed upon. But if the price goes up, you’re locked into the lower price you agreed on.
Options
An option is like an agreement that gives you the choice to buy something (like that rare toy) at a certain price, but you’re not obligated to do it. You pay a small fee for this privilege.
What are the two types of options ?
Calls - gives the buyer the right to buy an underlying asset at a fixed rate
Puts - gives the buyer the right to sell a given quantity of an underlying asset at a fixed price
What are warrants ? (3)
Warrants are longer dated options ( typically more than 9 months - most options have maximum maturity of 9 months ). They are typically traded over teh counter
European, American vs Bermuda options
European options can only be exercised on the expiry date
American options can be excercised at any time up-to and including the expiry date
Bermuda options (exotic option) can be exercised on predetermined dates (typically once every month)
