Los 39.c Flashcards
(12 cards)
What are the different classifications for assets
Securities, currencies, contracts, commodities and real assets.
What are different types of Equity Securities
Common stock = residual claim on assets after debtors and preferred stock holders are paid
Preferred stock = equity security with schedule dividends that do not change over the securities life and must be paid
Warrants = give the holder the right to buy a firms equity shares at a fixed exercise price.
Give me an example of pooled investment vehicles
Mutual funds = pooled investment funds, investors can purchase shares either from the fund itself (open-end) or in the secondary market (closed-end)
ETF or ETN(Note) - Trade like closed ends, but can allow conversion into portfolio securities, sometimes known as depositories, shares are depositry receipts
Asset backed securities - represent a claim to a portion of a pool of assets like mortgages, loans, credit card debt
Hedge funds -
What’s a FI security
Debt securities that are promises to repay borrowed money in the future, bonds = long term (5-10 yrs), notes = intermediate (less than 1 or 2), commercial paper = short term. Gov issues bills and banks issues certificates of deposits.
What is a reserve currency
Currency that is held by governments and central banks worldwide.
What is a contract
Agreement between two parties that require future action e.g. exchanging
Difference between a forward and a future?
A forward contract is an agreement to buy/sell an asset in the future at an agreed upon price whereas a future is the same as this, but it standardises them to amount by a clearing house.
What is a swap contract with examples
Two parties make a swap which is equivalent to an asset being trade for another. So the cash flows of both assets are paid to one another.
Interest swap = floating IR exchanged for fixed IR payments
Currency Swap = A swap in which each party makes interest payments to the other in different currencies.
Equity swap = A swap transaction in which at least one cash flow is tied to the return on an equity portfolio position, often an equity index.
What is an option contract?
Gives the owner the right, not the obligation to buy/sell asset at a specific price.
Buy = Call
Sell = Put
Seller of the option recieves option premium once option is sold but must execute their obligation if the buyer of the option exercises it.
What is an insurance contract
Cash amount if a future event occurs, an example of this is a Credit Default swap which makes a payment if an issuer defaults on it’s bonds
What are commodities
Commodities include precious metals, energy products, industrial metals, agricultural products, and carbon credits
Typically used in spot markets
