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MGMT 209B-03
Week 3 Equity Markets and Trading
| Front | Back |
|---|---|
| Primary market | Where new securities are created and sold directly by the issuer (e.g., IPOs or bond issues). |
| Secondary market | Where previously issued securities are bought and sold among investors, like the stock market. |
| Short selling | investor borrows shares of a security and sells them, hoping the price will fall. |
| Issues a fixed number of shares traded on the open market. Prices fluctuate based on supply and demand, and shares can trade at a premium or discount to NAV. | Closed-end Fund |
| Open-end Fund | Continually issues and redeems shares at NAV, based on investor demand, which aligns closely with the fund’s underlying asset value. |
| ETF | Pooled Investment-These are baskets of securities that trade on an exchange, offering diversification and liquidity. |
| Pooled investment vehicles managed by professionals, bought or redeemed at the end of the day at the fund's NAV. | Mutual Fund |
| occurs when the equity in a margin account falls below the required maintenance margin. | Margin call |
| market order | Buy or sell immediately at the best available price. |
| Buy or sell only at a specific price or better. | limit order |
| Trigger a market order once a specified price is reached. | stop order |
| Money Market | One year or less in maturity |
| More than 1 year in maturity | Capital Market |
| Long Position | Owns an asset or a contract. |
| Sold an unowned asset ( or has written or sold a contract if related to an Option . | Short Position |
| Initial Margin | The proportion of the total cost of the asset that an investor must invest with her own equity. |
| Maintenance Margin | The minimum equity allowed to maintain a position. Triggers a margin call if equity value fall below |
| Distribution System | For the initial offering of stocks and bonds in the primary market. Refers to the process by which new securities are sold and distributed to investors. investment banks or underwriters act as intermediaries, helping to raise capital. |
| Leverage Ratio | The leverage ratio is the ratio of the value of the position to the value of the equity investment in it. The leverage ratio indicates how many times larger a position is than the equity that supports it. |
| Margin Call | A margin call happens when you are required to contribute more equity or collateral to a position in a security that you are holding with a broker that was executed with a portion of the money that is borrowed. |
| Maximum Leverage Ratio | The maximum leverage ratio is associated with a position financed by the minimum margin requirement. To calculate, divide 1/min margin requirement |
| Best Efforts | The underwriter for a security offering accepts responsibility to only sell the issue, but does not take risk by buying the issue first, and then resell the issue (see terms like Distribution System and Bookbuilding) |
| Bookbuilding | Bankers selling securities in an IPO will build a book of buyers, with expected amounts that will be purchased to help insure the offering is successful |
| Shelf Registration | Sets up for later sales, under the same registration document |
| Rule 144A or Private Placement | Sales of securities do not need to be registered if the buyer is a Qualified Institutional Buyer (QIB). |
Created by:
meragedl