Chapter 20
institutional investors
investment professionals who are paid to manage other people's money
securities
investments certificates issued by the corporations or governments that represent either equity or debt
futures contracts
legally binding obligations to buy or sell specified quantities of commodities or financial instruments at an agreed in price at a future date
bond ratings
letter grades assigned to bond issues to indicate their quality or level of risk; assigned by rating agencies such as Moody's and Standard & Poor's
bear markets
markets in which securities prices are falling
bull markets
markets in which securities prices are rising
market indexes
measures of the current price behavior of groups of securities relative to a base value set of at an earlier point in time; used to monitor general market conditions
circuit breakers
measures that under certain conditions, stop trading in the securities markets for a short cooling off period to limit the amount the market can drop in one day
broker market
national and regional securities exchanges on whose premises securities
dealer markets
securities markets where buy and sell orders are executed through dealers, or "market makers" linked by telecommunication networks
market average
summerizes the price behavior securities based on the arithmetic average price of groups of securities at a given point in time; used to monitor general market conditions
National Association of Securities Dealers Automated Quotation System (nasdaq)
the 1st electronic based stock market and the fastest growing part of the stck market
principal
the amount borrowed by the issuer of a bond; also called par value
price/earnings ratio
the current market price of a stock divided by its annual earnings per share
Securities and Exchange Commission
the main federal government agency responsible for regulating the U.S. securities industries
Dow Jones Industrial Average
the most widely used market average; measures the stock prices of 30 large, well known corporations that trade on NYSE and NASDAQ
net asset value
the price at which share of a mutual fund can be bought or sold
underwriting
the process of buying securities from corporations and governments and reselling them to the public, hopefully at a higher price; the main activity of investment bankers
primary market
the securities market where new securities are sold to the public, usually with the help of investment bankers
secondary market
the securities market where old (already issued) securities are bought and sold or traded among investors
insider trading
the use of information that is not available to the general public to make profits on securities transactions
debentures
unsecured bonds that are backed only by the reputation of the issuer and its promise to pay the pricipal and interest when due
exchange-trade fund
a basket of stocks in a category, such as industry sector, investment objective, or geographical area, or that track an index. ETFs are similar to mutual funds but trade like stocks
mutual fund
a financial service company that pools its investors' funds to buy a selection of securities that meet its stated investment goals
interest
a fixed amount of money paid by the issuer of a bond to the bond holder on a regular schedule, typically every six months stated as the coupon rate
stock broker
a person who is licensed to buy and sell securities on behalf of clients
regulation FD
an SEC regulation that requires public companies to share information with all investors at the same time, leveling the information playing field
Standard & Poor's
an important market index that includes 400 industrial stocks, 140 financial stocks, includes NYSE, AMEX, and NASDAQ
municipal bonds
bonds issued by states, cities, countries, or other state and local government agencies
NASDAQ composit index
broad based market index that measures all NASDAQ domestic and international based common stocks listed on the NASDAQ stock market
options
contracts that entitle holders to buy or sell specified quantities of common stocks or other financial instruments
secured bonds
corporate bonds for which specific assets have been pledged as collateral
convertible bonds
corporate bonds that are issued with an option that allows the bondholder to convert them into common stock
mortgage bonds
corporate bonds that are secured by property, such as land, equipment, or buildings
Electronic Communications Networks
electronical trading networks that allow institutional traders and some individuals to make securities transaction directly
investments
firms that act as intermediaries, buying securities from corporations and governments, and reselling them to the public
high-yield (junk) bonds
high risk, high return bonds
