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FIN 330: EXAM 1
Primary Markets
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markets in which users of funds raise funds by issuing financial instruments
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Secondary Markets
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markets where financial instruments are traded among investors
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primary markets
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where new issues of financial instruments are offered for sale
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secondary markets
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where financial instruments, once issued, are traded
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Money Markets
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markets that trade debt securities with maturities of one year or less (CD's and US treasuries bills). Little or no risk of capital loss, but low return.
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capital markets
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markets that trade debt (bonds) and equity (stock) instruments with maturities of more than one year. Substantial risk of capital loss, but higher promised return.
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FX markets
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trading one currency for another (dollar for yen)
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Spot FX
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the immediate exchange of currencies at current exchange rates
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Forward FX
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the exchange of currencies in the future on a specific date and at a pre-specified exchange rate
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Immediate
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means delivery within one or two days
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derivative security
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A financial security whose payoff is linked to another security or commodity. Generally an agreement to exchange a standard quantity of assets at a set price on a specific date in the future.
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main purpose of derivative markets
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to transfer risk between market participants
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Over the counter (OTC) derivatives
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are nonstandard, largely unregulated and may involve substantial counter party credit risk
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forward rate agreements
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prearranged loan contracts with the loan terms set now, drawdowns in the future.
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The Securities Act of 1933
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full and fair disclosure and securities registration
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The Securities Exchange Act of 1934
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securities and exchange commission is the main regulator of securities markets
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financial institutions
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institutions through which suppliers channel money to users of funds
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depository institutions
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commercial banks, savings associations, savings banks, credit unions
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non-depository institutions
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contractual
non-contractual |
contractual |
insurance companies, pension funds
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non-contractual
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securities firms and investment banks, mutual funds
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