Week 2 - financial markets, institutions and intermediaries Flashcards
What are equity securities
Represents ownership and interest held by shareholders in an entity
What is debt security
Debt instruments that can be brought or sold between two parties that have basic terms defined e.g amount borrowed
What is a bond holder
Owner of debt securities that are typically issued by corporations and governments
What does the financing of a company depend on
- companies age
- growth rate
- nature of the business
Where does the money invested in real assets come from
Savings by investors
When do companies become net borrowers
When they raise cash by issuing debt securities
Financial markets
A type of marketplace where securities are issues and traded e.g the sale and purchase of financial assets
The stock market
Where shares are issues and traded
Secondary market
The market in which previously issues securities are traded among investors e.g london stock exchange
Primary market
The market for the sale of new securities by corporations
facilitated by underwriting groups that set starting price range for a given security
Fixed income market
the place where debt securities are issues and traded
Capital markets
The component of the financial market that allows long term trading of debt and equity backed securities
Money market
the component of financial markets where short term borrowing can be issued.
Included assets that deal with short term borrowing, lending and selling
Foreign exchange market
An over the counter global marketplace that determines the exchange rate for currencies around the world
Commodities market
a physical or virtual marketplace where market participants meet and buy or sell positions on commodity products e.g oil,gold,silver
Options and other derivatives markets
These instruments are not the source of financing but manage risk, value is derived based on the value of underlying securities
Financial institutions
An establishment that conducts financial transactions such as investments, loans and deposits
Financial intermediaries
Move funds from parties with excess capital to parties needing funds.
This process creates efficient markets and lowers the cost of conducting business
Commercial banks
A financial institution that grants loans, accepts deposits, offers basic financial products to both individuals and business
The main functions of commercial banks
- accepting deposits
- advancing credit facilities
- credit creation
- agency
