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Primary measure equity investors use to determine management of company is effectively using capital to generate profits
Specificed stop price condition Stop-loss ordersstop vs limit (stop:
when order can be filled, at or bellow for seller and at or above for
buyer. limit; will be sold if someone buys at a price relatively near or
lower the bid price while stop is only when it hits the price
derivative pricing rules that match buyers and selling who're willing
to trade at prices obtained from other markets. Derivative pricing rule;
price is derived from another market and does not depend on orders
submitted across the network.
Not trade securities given to investors
Securities classified according to market capitalization, value, growth etc.
Investment Funds generally organize as Limited Partnerships. Managers
are General Partners. Key differentiating factor is the management
compensation scheme and use of leverage to increase risk exposure and
hopeful increased returns
Selling of liquid assets aka government bonds. Trade debt instruments maturing within the year.
Value of price return index equals current value of index price times
the price return on index relative to time Any increase of return is
included by multiplying return rate plus one
in areers
borrowed money to buy on the margin
100 = 1%
Legally organized investment trust, corporate investment companies, or
investment vehicles that may be open-ended/closed-ended
funds.Open-ended: issue new shares and redeem existing shares on demand
(daily basis). Investors trade directly with the firm NAV of fund
portfolio is price redemption Close-end funds: shares in primary market
offering that eventually can only be exchanged on secondary market for
profit
How to arrange final settlement of trades; indicate what entity is
responsible for clearing and settling trade. Must appear on security
sale orders is an indication of whether sale is long sale or short sale
and must declare whether its available for delivery or can borrow.
Fixed Income SecuritiesEquity Securities- Common, Preferred, and
Warrants (L.T. Options) Pooled Investments - Mutual Funds, Asset Backed
Securities, and Hedge Funds
Value is based on analysis of investment fundamentals and
characteristics that are dependent on analyst approach to valuation
There's bottom up and top down approach
All or nothing orders can only trade if entire sizes can be traded.
Hidden Orders: exposed only to brokers or exchanges that receive them
(cannot be disclosed until filled) Iceberg Orders: Majority of order is
hidden until purchased; traders will only indicate specific display
sizes for orders, exposing only the size for orders but hiding the rest
as an "iceberg"
These are the dealers and brokers. Typically have conflicting
interests on how they fill customers' orders. Brokers must find the best
price, but dealers must profit when selling. Brokers arrange trades on
behalf of clients. Dealers are proprietary traders who trade with their
clients.
Corporation selling securities directly to small group of qualified investors
To increase book value/shareholders equity on company's balance sheet
of company and maximize market value of its equity Market value also
reflects collective and differing expectation of investors concerned
about FCF of the company
Rebalancing: adjusting of weights or securities in index. This can
create turnover Price weighted indexes do not rebalance because weight
is determined on price
Agreement to exchange payments of periodic cash flow that depend on
future asset prices or interest rates - Interest rate swaps: one party
makes fixed cash payments to counter-party in exchange for variable cash
payments which are based on pre-specified variable interest rate
(LIBOR, SHIBOR, etc) - *exchanges fixed interest payments for variable
interest payments * Good for: fixed long term income stream they want to
convert to cash flow with current ST interest rate (visa versa)
Commodity Swap: swap of fix
Tangible properties - income and tax benefits RA generate is prime. -
change in value have low correlation with other investments Securitizing
real assets to facilitate indirect investments in real assets REITs
(real estate investment trust) MLPs (Master limited partnership)
...
Lenders require short seller to leave proceeds of short sale on
deposit with them as collateral for stock loan and reinvest it in
short-term securities, which rebates the interest to the short seller at
rates called SHORT REBATE RATES.
Alternative Trading systems (ATSs) are electronic communication
networks (ECNs) or multilateral trading facilities (MTFs) ATNs are
commonly dark pools, they don't display client's orders
Conversion OptionsPut provisions
Open-ended funds traded in secondary markets. Prices rarely differ
from NAV - Authorized participants (APs) has option of trading with the
ETF directly. - APs will essentially ensure the price of the portfolio
and market trading price is similar to each other (Mkt price = to NAV
essenailly) since APs trade relative to supply demand, overall
valuation, and will help regulate it.
The process of buying assets, placing them in pools, and selling
securities that represent ownership of the pool. - improves liquidity of
mortgage markets (allow people to buy mortgages indirectly) -
Specialized Purpose Vehicles (SPVs) / Specialized Purpose Entities
(SPEs). helpful to investors because interest in asset pool are
protected in SPV - Banks securitize credit card receivables, bank loans,
airplane leases etc. hell shit basically (or Tranches) -Pass through
securities based on investment pools ET
Traditional: Stocks and Bonds Alternative Assets: Commodities, Hedge funds, Private Equity, Etc.
When bond is at a discount, YTM should be greater than Coupon rate
Agreement to trade underlying assets in the future on agreed price
today. - reduces risk - "hedgers" Issues: - Counterparty Risk: risk of
other party to a contract will fail to honor the terms on the contract -
Liquidity: trading out forward contracts is difficultFutures is a
standardized forward contract for which 1) clearinghouse guarantees
performance of all traders is not harmed if another trader fails to
honor the contract - acts as buyer for every seller as the seller for
every buyer - releases trade
...
Spot: Assets are bought right NOWForwardFuture (standardize contracts of forward contracts
The long term debt securities and equity securities that will either have long maturity or no maturity
Interest goes down, cost of borrowing goes up
Marketable Limit orders: limit price is placed above price. Named
because the order can trade immediately. behind market: buy order placed
below the best bid, not executed unless price drops. standing limit
orders: waiting trading orderslimit order book: orders are presented
ranked by limit prices for the market
corporation distribution rights to buy stock at fixed price to
existing shareholders in proportion to their holdings. Exercise is to be
set below market price (currently). Short term stock warrants
Dividend discount model and capital asset pricing model
determined by markets and generally available only to institutional short-sellers and some large retail traders.
Value/Income payments are derived from pool of assets (mortgage bonds,
credit card debt, car loans) Securities typically pass interest and
principal payments received from pool of assets from holders on monthly
basis. Tranches: classes of securities
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