What's it: Derivatives are financial instruments whose value is derived from one or more underlying assets. To put it another way, the price depends on the underlying asset. Thus, price fluctuations in the underlying asset ultimately
Investment Options
Complete Bond Features. What You Need To Know.
Bond features differ from bond to bond. These features ultimately affect the risk and return we get when we buy bonds. For example, we differentiate bonds based on their issuer, which can come from corporations, governments, or
Common Stock: How it Works, Types, Features, Advantages, and Disadvantages
What's it: Common stock or ordinary stock is a security representing ownership in a company. Therefore, buying it makes us a shareholder. And as long as we hold it, we have the right to earn profits distributed as dividends without
Securities in the Financial Market: Equity, Debt, Pooled investment, Derivatives
What's it: Securities are tradable certificates or financial assets, which we can buy for regular income or sell later for a profit when the price goes up. They have many variations. Equities and bonds are the most
Financial Market Investors: Roles and Types
Who’re they: Financial market investors are those who invest money in financial markets to earn returns. They may be retail investors or institutional investors. They trade various financial instruments such as stocks, bonds,
Collateral: How it Works and Why It Matters
What's it: Collateral is a borrower's asset pledged when taking out a loan. They agreed to turn it over to the lender when they defaulted on the loan. For lenders, it aims to secure loan repayments and reduce the impact of a default. Meanwhile,
Commodity Indexes: A Comprehensive Guide
A commodity index tracks the price movement of a group of commodities. Think of it as a snapshot of how these raw materials, like oil, gold, or corn, perform. This snapshot helps investors understand broader market trends.We understand that
Venture Capital: How It Works, How It Makes Money, Investment Horizon
What's it: Venture capital is capital invested in a new company, startup, or young company, in return for ownership. It is a form of private equity besides leveraged buyouts (LBOs), minority equity, and distressed investing. Venture
Going Private: Meaning, Reasons, Methods, Benefits
What's it: Going private is when a company's stock is no longer traded for the public. It is the opposite of going public, i.e., a company lists its shares on a stock exchange for trading by the public. And, when it is listed on the stock
Sovereign Wealth Funds: Purposes, Source of Funds, Top-10 Lists
What's it: Sovereign wealth funds (SWFs) is a state-owned investment fund. The allocation may be in real assets or in financial assets such as stocks, bonds, and real estate. It is a pooled investment vehicle in global financial markets plus
Cross-Border Listing: Meaning, Examples, Pros, and Cons
What's it: Cross-border listing is the listing of company shares in a country other than its origin. When a company lists its shares in two different countries, we call it a dual listing. Dual listings create arbitrage opportunities, as the same
Spot Market: Meaning, Features, Examples, Advantages
What's it: Spot market is a market in which trading takes place for immediate delivery. Examples of spot markets are the market for securities, commodities, and foreign exchange (forex).Ideally, delivery takes place a few seconds after completion
Option: Meaning, Characteristics, Types, How it Works, Examples
What's it: An option is the right to buy or sell a certain number of commodities, currencies, or securities on a specific date for a specified price. Traded options can be bought or sold at any time on any exchange, in contrast to traditional
Shadow Banking: Meaning, How It Works, Pros and Cons
What's it: Shadow banking is intermediary financial activities but is not subject to the banking system's regulatory oversight. They usually take other parts of the financial system, which commercial banks are neither allowed nor willing to
Bear Market: Causes, and Investing Strategies
What's it: A bear market refers to a capital market experiencing a period of decline in performance. Bear is a term applied to an investor who is pessimistic about a particular security price prospect. Such a downturn in the market we call
Sovereign Risk: Meaning, Indicators, How It is Measured
What's it: Sovereign risk is credit risk attached to the sovereign debt where the government in a country will not pay its debt. It may be because the government doesn't have the ability or will to do so. Long story short, it is the default risk on
Financial Services Industry: Structure and Importance
The financial services industry refers to various institutions that facilitate the transfer of funds between savers and spenders. Examples are banks, insurance companies, pension funds, and securities companies.Savers have some money to invest in
Financial System: Its Role, Functions, and Characteristics When It Works Effectively
When we talk about the financial system, we refer to the institutions and other elements involved in circulating funds in the economy. The system includes financial institutions such as banks, pension funds, and insurance companies. Meanwhile, other
Securitized Bonds: Meaning, Types, Benefits
Securitized bonds are bonds where coupon and interest payments come from a collection of other underlying assets. For example, a bank pools its mortgage into debt securities. This security is what we call securitized bonds.In a simple model of
Bond Issuers: Who Are They?
Bond issuers come from national governments, local governments, quasi-governmental institutions, supranational institutions, and companies. Each has a different default risk. For example, government default bonds are considered less risky than
Stock: Types, Risk, Return, Advantages, and Disadvantages
What's it: Stock is the ownership certificates of a company. When you buy stocks of a company, you own the company's shares and are entitled to the assets and income of the company.Stock is also known as share or equity. Specifically, the term