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Intro to Investments > Midterm 1 > Flashcards

Midterm 1 Flashcards

(80 cards)

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0
Q

Real Assets

A

Assets used to produce goods and services.

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1
Q

Investment

A

Commitment of current resources in the expectation of deriving greater resources in the future.

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2
Q

Financial Assets

A

Claims on real assets or the income generated by them.

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3
Q

Fixed-Income (debt) Securities

A

Pay a specified cash flow over a specific period.

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4
Q

Equity

A

An ownership share in a corporation.

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5
Q

Derivative Securities

A

Securities providing payoffs that depend on the values of other assets.

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6
Q

Agency Problems

A

Conflicts of interest between managers and stockholders.

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7
Q

Asset Allocation

A

Allocation of an investment portfolio across broad asset classes.

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8
Q

Security Selection

A

Choice of specific securities within each asset class.

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9
Q

Security Analysis

A

Analysis of the value of securities.

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10
Q

Risk-return Trade-off

A

Assets with higher expected returns entail greater risk.

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11
Q

Passive Management

A

Buying and holding a diversified portfolio without attempting to identify mispriced securities.

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12
Q

Active Management

A

Attempting to identify mispriced securities or to forecast broad market trends.

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13
Q

Financial Intermediaries

A

Institutions that “connect” borrowers and lenders by accepting funds from lenders and loaning funds to borrowers.

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14
Q

Investment Companies

A

Firms managing funds for investors. An investment company may manage several mutual funds.

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15
Q

Investment Bankers

A

Firms specializing in the sale of new securities to the public, typically by underwriting the issue.

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16
Q

Primary Market

A

A market in which new issues of securities are offered to the public.

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17
Q

Secondary Market

A

Previously issued securities are traded among investors.

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18
Q

Venture Capital (VC)

A

Money invested to finance a new firm.

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19
Q

Private Equity

A

Investments in companies that are not traded on a stock exchange.

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20
Q

Securitization

A

Pooling loans into standardized securities backed by those loans, which can then be traded like any other security.

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21
Q

Systemic Risk

A

Risk of breakdown in the financial system, particularly due to spillover effects from one market into others.

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22
Q

Money Markets

A

Include short-term, highly liquid, and relatively low-risk debt instruments.

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23
Q

Treasury Bills

A

Short-term government securities issued at a discount from face value and returning the face amount at maturity.

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24
Certificate of Deposit
A bank time deposit.
25
Commercial Paper
Short-term unsecured debt issued by large corporations.
26
Bankers' Acceptance
An order to a bank by a customer to pay a sum of money at a future date.
27
Eurodollars
Dollar-denominated deposits at foreign banks or foreign branches of American banks.
28
Repurchase Agreements (repos)
Short-term sales of government securities with an agreement to repurchase the securities at a higher price.
29
Federal Funds
Funds in the accounts of commercial banks at the Federal Reserve Bank.
30
LIBOR
Lending rate among banks in the London market.
31
Treasury notes or bonds
Debt obligations of the federal government with original maturities of one year or more.
32
Municipal Bonds
Tax-exempt bonds issued by state and local governments.
33
Corporate Bonds
Long-term debt issued by private corporations typically paying semi-annual coupons and returning the face value of the bond at maturity.
34
Common Stocks
Ownership shares in a publicly held corporation. Shareholders have voting rights and may receive dividends.
35
Preferred Stock
Nonvoting shares in a corporation, usually paying a fixed stream of dividends.
36
Price-weighted Average
An average computed by adding the prices of the stocks and dividing by a "divisor".
37
Market Value-weighted Index
Index return equals the weighted average of the returns of each component security, with weights proportional to outstanding market value.
38
Equally Weighted Index
An index computed from a simple average of returns.
39
Derivative Asset
A security with a payoff that depends on the prices of other securities.
40
Call Option
The right to buy an asset at a specified price on or before a specified expiration date.
41
Put Option
The right to sell an asset at a specified exercise price on or before a specified expiration date.
42
Futures Contract
Obliges traders to purchase or sell an asset at an agreed-upon price at a specified future date.
43
Private Placement
Primary offerings in which shares are sold directly to a small group of institutional or wealthy investors.
44
Initial Public Offering (IPO)
First sale of stock by a formerly private company.
45
Underwriters
Underwriters purchase securities from the issuing company and resell them to the public.
46
Prospectus
A description of the firm and the security it is issuing.
47
Dealer Markets
Markets in which traders specializing in particular assets buy and sell for their own accounts.
48
Auction Market
A market where all traders meet at one place to buy or sell an asset.
49
Bid Price
The price at which a dealer or other trader is willing to purchase a security.
50
Ask Price
The price at which a dealer or other trader will sell a security.
51
Bid-ask Spread
The difference between the bid and asked prices.
52
Limit Buy (sell) Order
An order specifying a price at which an investor is willing to buy or sell a security.
53
Stop Order
Trade is not to be executed unless stock hits a price limit.
54
Over-the-Counter (OTC) Market
An informal network of brokers and dealers who negotiate sales of securities.
55
NASDAQ Stock Market
The computer-linked price quotation and trade execution system.
56
Electronic Communication Networks (ECNs)
Computer networks that allow direct trading without the need for market makers.
57
Specialist
A trader who makes a market in the shares of one or more firms and who maintains a "fair and orderly market" by dealing personally in the market.
58
Stock Exchanges
Secondary markets where already-issued securities are bought nd sold by members.
59
Latency
The time it takes to accept, process, and deliver a trading order.
60
Algorithmic Trading
The use of computer programs to make rapid trading decisions.
61
High-frequency Trading
A subset of algorithmic trading that relies on computer programs to make very rapid trading decisions.
62
Blocks
Large transactions in which at least 10,000 shares of stock are bought or sold.
63
Dark Pools
Electronic trading networks where participants can anonymously buy or sell large blocks of securities.
64
Margin
Describes securities purchased with money borrowed in part from a broker. The margin is the net worth of the investor's account.
65
Short Sale
The sale of shares not owned by the investor but borrowed through a broker and later purchased to replace the loan.
66
Inside Information
Nonpublic knowledge about a corporation possessed by corporate officers, major owners, or other individuals with privileged access to information about the firm.
67
Premium
The purchase price of an option.
68
Investment Companies
Financial intermediaries that invest the funds of individual investors in securities or other assets.
69
Net Asset Value (NAV)
Assets minus liabilities expressed on a per-share basis.
70
Unit Investment Trusts
Money pooled from many investors that is invested in a portfolio fixed for the life of the fund.
71
Open-end Fund
A fund that issues or redeems its shares at net asset value.
72
Closed-end Fund
Shares may not be redeemed, but instead are traded at prices that can differ from net asset value.
73
Load
A sales commission charged on a mutual fund.
74
Hedge Fund
A private investment pool, open to wealthy or institutional investors, that is exempt from SEC regulation and can therefore pursue more speculative policies than mutual funds.
75
Funds of Funds
Mutual funds that primarily invest in shares of other mutual funds.
76
12b-1 Fees
Annual fees charged by a mutual fund to pay for marketing and distribution costs.
77
Soft Dollars
The value of research services that brokerage houses provide "free of charge" in exchange for the investment manager's business.
78
Turnover
The ratio of the trading activity of a portfolio to the assets of the portfolio.
79
Exchange-traded Funds
Offshoots of mutual funds that allow investors to trade index portfolios.

Intro to Investments (2 decks)

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