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Chapter 3

Financial markets and the investment banking process

Best efforts arrangement Agreement for the sale of securities in which the investment bank handling the transaction gives no guarantee that the securities will be sold.
Capital markets The segments of the financial markets where the insttruments that are traded have maturities greater than one year.
Debt markets Financail markets where loans are traded.
Equity markets Financial markets where corporate stocks are traded.
Financial markets A system consisting of individuals and institutions, instruments and procedures that bring together borrowers and savers.
Informational efficiency The prices of investments reflecting existing information and adjusts quickly when new information enters the market.
Initial public offering(IPO) market The market consisting of stocks of companies that have just gone public.
Insiders Officers, directors, major stockholder, or others who might have inside information on a company's operations.
Investment Banker An organization that underwrites and distributes new issues of securities; it helps businesses and othe entities obtain needed finances.
Money markets The segment of the financial markets where the instruments thaat are traded have maturities equal to one year or less.
Over the counter markets A collection of brokers and dealers, connected electronically by telephones and computers, that provides for trading in securities not listed on the organized exchange.
Primary markets markets in which various organizations raise funds by issuing new securities.
Prospectus A document describing a new security issue and the issuing company.
Registration statement A statement of facts filed with the SEC about a company that plans to issue secutities.
Secondary markets Markets where financial assets that have been previously issued by various organization are traded amoung investors.
Undrwriters spread The difference between the price at which the investment banking firm buys an issue from a company and the price at which the securities are sold in the primary market; it represents the in vestment banker's gross profit on the issue.
Underwritten agreement Agreement for the sale of securities from the issuer, thus agreeing to bear any risk involved in the transaction.t
Created by: $amoney