Lesson 2

• A market is a venue where goods and services are exchanges.
• A financial market is a place where individuals and organization wanting to borrow funds are brought together with hose having a surplus of funds
• Physical assets are tangible - products
• Financial Assets are stocks, bonds notes, & mortgages
• Spot is those sold for on the spot delivery within a few days.
• Futures is agree to sell an asset at some future date
• Money, funds borrowed for short period
• Capital is for stocks or long term debt
• Primary are raise new capital - new securities
• Secondary are existing, outstanding securities are traded among investors
• Public are standardized contracts are traded on organized exchanges
• Private are transaction that are negotiated directly between two parties.
• Well functioning financial markets facilitate the flow of capital from investors to the user of capital
• Markets provide savers with returns on their money saved/invested, which provide them money in the future.
• Markets provide users of capital with the necessary funds to finance their investment projects.
• Well functioning markets promote economic growth
• Economies with well-developed markets perform better then economies with poorly-functioning markets.
• Financial institutions are intermediaries that channel the savings of individual, businesses, and government into loans or investments
• they key suppliers and demanders of funds are individuals, businesses, and governments
• Individuals are net suppliers of funds, while businesses and government are net demanders funds.
• Commercial banks are institutions that provide savers with a secure place to invest their funds, and offer loans to individual and business borrowers.
• Investment banks are institutions that assist companies in raising capital, advise firms on major transaction such as mergers or financial restructurings, engage in trading and market making activities.
• The Glass-Steagall Act was an act of Congress in 1933 that created the federal deposit insurance program and separated the activities of commercial and investment banks. It was repealed it 1999 by congress
• The shadow banking system describes a group of institutions that, engage in lending activities, much like traditional banks but do not accept deposits, are not subjects to the same regulations as traditional banks.
• A private placement involves the sale of a new security directly to an investors or group of investors
• Most firms, raise money through a public offering of securities, which is the sale of either bonds or stocks to the general public.
• Primary Market, is the financial market in which securities are initially issued; the only market in which the issuer is directly involved in the transacitons
• Secondary market are financial markets in which preowned securities (those that are not new issues) are traded.
• Money market is created by a financial relationship between suppliers and demanders of short-term funds
• Most money market transaction are made in marketable securities which are short-term debt instruments
• Investors generally consider marketable securities to be among the least risky investments available.
• Capital Market is a market that enables suppliers and demander of long-term funds to make transacitons.
• Bonds are long-term debt instruments used by businesses and government to raise large sums of money, generally from a diverse group of lenders
• common stock are units of ownership interest or equity in a corporation.
• preferred stock, is a special form of ownership that has features of both a bond and common stock
• Broker markets are securities exchanges on which the two sides of a transaction, the buyer and seller, are brought together to trade securities
• Dealer Markets, are markets in which the buyer and seller are not brought together directly but instead have their orders executed by securities dealers that "make markets" in the given security