Chapter 12 - The Global Capital Market

Hedge Fund

Are private investment funds that position themselves to make "long bets" on assets that they think will increase in value and "short bets" on assets that they think will decline in value

Market Makers

Are the financial service companies that connect investors and borrowers, either directly or indirectly.

Capital Market

Brings together those who want to invest money and those who want to borrow money

Who are market makers

Commercial Banks (e.g., Citi; Bank of America) and Investment Banks (e.g., Goldman Sacs; J.P. Morgan)

What entities want to invest money

Corporations with surplus cash, individuals, and nonbank financial institutions (e.go., pension funds, insurance companies)

Share of Stock

Gives its holder a claim to a firms profit stream. Corporations honors this claim by paying dividends to the stockholders

Those who want to borrow money

Individuals, companies, and governments

Maturity period of debt

Maturity period of loans vary from the very long term, such as 20 years, to extremely short-term loans, including those with a maturity of just one day.

How do Stock Prices incease?

Stock prices increase wen a corporation is project to have greater earnings in the future, which increases the probability that it will raise future dividend payments

Market Makers

Those who want to borrow money and those who want to invest money

Equity Loan

When a corporation sells stock to investors

Bond purchase

When an investor purchases a corporate bond,he purchases the right to receive. Specified fixed stream of income from the corporation for a specified number of years (i.e., until the bond maturity date)

Capital Market

market in which financial capital is loaned and/or borrowed for more than one year