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real asset

A used to produce good/service

financial asset

claims on real A OR income made from them

fixed income (debt) security

pay specific cash flow over specific period

equity

ownership share in a corp

derivative securities

securities that have payoffs depending on the value of other A

asset allocation

allocating an investment portfolio across broad A classes

security selection

choosing specific securities w/in each A class

passive mgmt

buying/holding a diversified portfolio w/o looking for mispriced securities

active mgmt

looking for mispriced securities / forecast market trends

financial intermediaries

institutions, connecting borrowers & lenders, accept funds from lenders & loaning funds to borrowers

investment bankers

sell new securities to public, they underwrite the issue

private equity

investing in co's not traded on stock exchanges

securitization

pooling loans together, which can now trade as any other security

systematic risk

risk of breakdown in entire market

money markets

S-T, HIGHLY liquid, low-risk D instruments

Treasury bills

S-T, govt securities, issued at discount, return face value at maturity

certificate of deposit

bank time deposit, penalty for taking out early

commercial paper

S-T unsecured D, issued by large corps. PRO: Doesn't need approval from SEC, cheap to issue

bankers' acceptance

an order to a bank by customer, pay sum of $$$ at future date

Eurodollars

dollar ($) deposits at foreign banks, foreign branches of American banks

repos (repurchase agreements)

S-T sales of govt securities w/ an agreement to re-buy the securities at HIGHER P. Used for short-term capital raising, done on an overnight basis

Federal Funds

funds in the accts of commercial banks at Federal Reserve

LIBOR

the lending rate b/w banks in London

Treasury notes / bonds

D obligations of federal govt w/ original maturities of 1+ yrs

municipal bonds

tax-exempt bonds, St & local govts

corporate bonds

LTD, issued by PRIVATE corp, usually semiannual coupons

common stock

ownership, PUBLIC corp, voting rights & maybe dividends

preferred stock

nonvoting shares, usually fixed stream of dividends

price-weighted index

Dow Jones

value weighted index

S&P 500

derivative A

security w/ a payoff, depending on the P of OTHER securities

call option

right to buy an A at specific P on/before expiration date

put option

right to sell an A at specific P on/before expirationdate

futures contract

traders, purchase/sell an A at agreed P at specific date

private placement

primary offerings (IPO), shares sold directly to small group of institutional / wealthy investors

underwriters

buy securities from issuing co, then THEY sell to the public

prospectus

description of the firm, what security it's issuing

limit buy/sell order

order, specifies P which investor is willing to buy/sell security

stop order

trade won't be executed UNTIL stock hits P limit

ECN

computer, direct trading w/o need for market makers

latency

time it takes to accept, process, deliver a trading order

algo trading

computer programs, quick decisions

high frequency rading

subset of algo trading

blocks

single transactions, 10K+ stocks bought/sold

dark pools

electronic networks, anonymously buy/sell BLOCKS of securities

margin

securities bought w/ $$$ borrowed from broker. margin = net worth of the investor's acct

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