Unit 3

Question 1

DVP/RVP

Answer 1

Delivery versus payment (DVP)
Receipt vs. Payment (RVP)
Cash on delivery (COD) settlement
is a securities industry settlement method that guarantees the transfer of securities only happens after payment has been made.

Question 2

Sovereign debt

Answer 2

Securities issued by national governments

Question 3

Duration

Answer 3

A measure of the sensitivity of a debt security when interest rates change in the marketplace.
A measurement of the time it takes for the interest payments to repay the invested principal.
The higher the coupon rate, the shorter the duration.
The lower the coupon rate, the longer the duration.

Question 4

Structured product

Answer 4

Securities derived from or based on a single security, a basket of securities, an index, a commodity, a debt issuance and/or a foreign currency

Question 5

ELN

Answer 5

Equity-linked notes
Debt instrument
Final payment linked to a stock, basket of stocks, or equity index

Question 6

ETN

Answer 6

Exchange-traded note
ELN trader on an exchange

Question 7

Underwriting

Answer 7

Bringing a new issue public, whether it is equity or debt

Question 8

Indenture

Answer 8

Deed of trust

Question 9

Trustee

Answer 9

The trustee is usually a financial institution, such as a trust company. The trustee represents the investors.

Question 10

Eurobond

Answer 10

Any long-term debt instrument issued and sold outside the country of the currency in which it is denominated.

Question 11

Yield curve analysis

Answer 11

Compares the yields of highly rated corporate bonds to those of Treasury bonds
When the spread is narrow, economic conditions in the US are generally favorable.
When the spread widens, the credit spread, it is generally a sign of a worsening economy.
Quiz question, not in LEM

Question 12

Basis (of a bond)

Answer 12

Yield to maturity, YTM