A financial marketplace where debt instruments, primarily bonds, are bought and sold is called a bond market. The dealings in a bond market are limited to a small group of participants. Contrary to stock or commodities trading, the bond market (also known as the debt market) lacks a central exchange.
Players in a Bond Market
The bond market involves transactions among three key players:
# Issuers: They comprise of organizations and other entities that sell bonds to raise funds to finance their operations.These include banks, both local and multinational, as well as the government as an issuing entity.
# Underwriters: This segment consists mainly of investment banks and institutions that are leaders in the investing business. They help the issuer to raise funds by selling bonds. Also, they perform the key role of middlemen and undertake crucial activities, such as preparing legal documents, prospectus and other collaterals to simplify transactions.
# Purchasers: This is the group that buys the debt instruments. In addition to the government and corporations, this section consists of individual investors who invest in the bond market through unit-investment trusts, close-ended funds and bond funds.
Types of Bond Markets
Based on the types of bonds in which they deal, the Securities Industry and Financial Markets Association has categorized the bond market into five types. These are:
* Corporate: includes trading in debt securities issued by corporations and industries to raise funds.
* Government and Agency: involves trading in bonds issued by government departments as well as enterprises sponsored by the government or agencies backed by it.
* Municipal: covers transactions in municipal securities issued by states, districts and counties.
* Mortgage Backed Securities: includes dealings in asset-backed securities that are protected by mortgages.
Risk Factors in a Credit Market
Although dealings in the fixed-income market might be lucrative, an investor must be aware that these are prone to variations in interest rates. When the market-based interest rate rises, there is a decline in the value of existing bonds. This is on account of the issuance of new bonds at a higher interest rate.
In order to limit your exposure to losses arising from escalations in the interest rate, it is advisable to hold a bond till maturity.
Friday, January 14, 2011
US Cities Real Estate
Get below on real estate among various cities in United States:
* Atlanta Real Estate
Atlanta real estate business includes a wide variety of services in the fields of selling and Purchasing of a property. Find detailed on the Atlanta real estate.
* Chicago Real Estate
Real Estate professionals in Chicago have been rendering a wide range of services in the Chicago Real Estate Business. Get more on Chicago Real estate business.
* New York City Real Estate
New York City real estate brokers have been offering a wide range of services in having a real estate in the state. Know more on the real estate business in the New York City.
* Boston Real Estate
Real estate in Boston encompasses various real estate operations like buying, selling and renting of premises. Boston real estate brokers provides various services to the commercial groups as well as individuals.
* Atlanta Real Estate
Atlanta real estate business includes a wide variety of services in the fields of selling and Purchasing of a property. Find detailed on the Atlanta real estate.
* Chicago Real Estate
Real Estate professionals in Chicago have been rendering a wide range of services in the Chicago Real Estate Business. Get more on Chicago Real estate business.
* New York City Real Estate
New York City real estate brokers have been offering a wide range of services in having a real estate in the state. Know more on the real estate business in the New York City.
* Boston Real Estate
Real estate in Boston encompasses various real estate operations like buying, selling and renting of premises. Boston real estate brokers provides various services to the commercial groups as well as individuals.
Stock Market
Stock Market is the most important market of the modern capitalist economy. Now-a-days, the performance of an economy is judged on the basis of the rise and fall of its financial market. The stocks reflect the performance of the performance of the respective companies and the index shows the overall picture of the entire market. This helps in gauging the health of the economy as a whole. Stock Market gives indication to the investors (both domestic and foreign) about their potential of their investment and the expected return from it.
Stock Market plays the coveted role of channelization of idle savings fund of the households (general public) to the corporates for productive investment. On one hand, the investors get the chance of becoming the shareholder of the company and on the other hand, the businesses, especially the small ones, get the required funds for expansion.
Stock is the ownership of certificate (either in physical or dematerialized form) of any company.
Stock Market Index
Stock Market Index is selected by considering a set of stocks among the total stocks, which represent all most all the sectors of an economy.
US Stock Market
Major companies over the world coming under Fortune 500 list are listed in US Stock Market. Get an overview on the US stock market.
Stock Market Charts
Stock Market Charts can be defined as series of the prices of stocks plotted over a particular time period. Find more on stock market charts
Stock Market Strategies
Stock Market Trends
European Stock Market
Shanghai Stock Market
Stock Market Quotes
Stock Market Prices
Stock Market Report
Stock Market Trading
Stock Market Overview
Stock Market Closing
Stock Market Companies
World Stock Market
Japanese Stock Market
Stock Market Watch
Stock Market believes in unhindered functioning of the market and considers that the market itself produces optimum results through its invisible hands (demand-supply mechanism). It considers market to be supreme and it discounts every incident (domestic economy, world economy, specific company news, etc.) around the world.
The underlying theory behind the functioning of Stock Market is the supply side economics which emphasizes the economic concepts such as Laffer Curve. Share Market generally advocates the philosophy of laissez-faire (free market) economy and always argue in favor of less restrictive import and immigration policies.
Share Market is an organized market where shares are issued and traded. These shares are either traded through Stock exchange or Over-the-Counter in physical or electronic form.
Share Market can be divided into two parts :-
* Primary Market
* Secondary Market
Primary Market deals with securities that are channelized through the Initial Public Offer (IPO) route.
Secondary Market is the market where the investors trade securities among themselves in the quest of making profit.
Common stocks, bonds, preferential stocks, convertible preferential stocks, warrants, etc are part of the stock market.
Some of the major Stock Markets around the world are :-
* New York Stock Exchange (NYSE)
* NASDAQ
* London Stock Exchange
* Tokyo Stock Exchange
* Hong Kong Stock Exchange
Indian (National Stock Exchange of India and Bombay Stock Exchange)and Chinese (Shanghai Stock Exchange and Shenzhen Stock Exchange) bourses are also coming up very fast and are performing magnificently. They are projected to be the future front runners of the world along with USA.
Stock Market plays the coveted role of channelization of idle savings fund of the households (general public) to the corporates for productive investment. On one hand, the investors get the chance of becoming the shareholder of the company and on the other hand, the businesses, especially the small ones, get the required funds for expansion.
Stock is the ownership of certificate (either in physical or dematerialized form) of any company.
Stock Market Index
Stock Market Index is selected by considering a set of stocks among the total stocks, which represent all most all the sectors of an economy.
US Stock Market
Major companies over the world coming under Fortune 500 list are listed in US Stock Market. Get an overview on the US stock market.
Stock Market Charts
Stock Market Charts can be defined as series of the prices of stocks plotted over a particular time period. Find more on stock market charts
Stock Market Strategies
Stock Market Trends
European Stock Market
Shanghai Stock Market
Stock Market Quotes
Stock Market Prices
Stock Market Report
Stock Market Trading
Stock Market Overview
Stock Market Closing
Stock Market Companies
World Stock Market
Japanese Stock Market
Stock Market Watch
Stock Market believes in unhindered functioning of the market and considers that the market itself produces optimum results through its invisible hands (demand-supply mechanism). It considers market to be supreme and it discounts every incident (domestic economy, world economy, specific company news, etc.) around the world.
The underlying theory behind the functioning of Stock Market is the supply side economics which emphasizes the economic concepts such as Laffer Curve. Share Market generally advocates the philosophy of laissez-faire (free market) economy and always argue in favor of less restrictive import and immigration policies.
Share Market is an organized market where shares are issued and traded. These shares are either traded through Stock exchange or Over-the-Counter in physical or electronic form.
Share Market can be divided into two parts :-
* Primary Market
* Secondary Market
Primary Market deals with securities that are channelized through the Initial Public Offer (IPO) route.
Secondary Market is the market where the investors trade securities among themselves in the quest of making profit.
Common stocks, bonds, preferential stocks, convertible preferential stocks, warrants, etc are part of the stock market.
Some of the major Stock Markets around the world are :-
* New York Stock Exchange (NYSE)
* NASDAQ
* London Stock Exchange
* Tokyo Stock Exchange
* Hong Kong Stock Exchange
Indian (National Stock Exchange of India and Bombay Stock Exchange)and Chinese (Shanghai Stock Exchange and Shenzhen Stock Exchange) bourses are also coming up very fast and are performing magnificently. They are projected to be the future front runners of the world along with USA.
Share Market
Share market is the market for securities where organized issuance and trading of shares takes place either through exchanges or over-the-counter in electronic or physical form.
Basically, Share Market can be divided into two parts :-
1. Primary MarketIt is the market where new issues of securities are offered to the investors.
2. Secondary MarketAn investor of a secondary market buys a security from another participant of the same and not from any issuing corporation (as in case of Primary Market).
Shares in the Share Market are either traded through :-
(a) Stock Exchange These are organized market places where stocks, bonds are other equivalents are traded between the buyers and sellers where exchange acts as a counter-party to both the participants in case of any default. The contracts are standardized and not customized ones. For example, NYSE, NASDAQ, NSE, NIKKEI, etc.
(b) Over-the -Counter (OTC)These are not centralized exchanges. Here, the trade takes place through a network of dealers. Generally, the OTC contracts are bilateral customized contracts and not standardized ones.
Earnings Per Share
Earnings Per Share or EPS can be defined as the profit portion of the company mainly allocated to the outstanding share. Find in detailed about EPS.
Share Prices
In the secondary market, the share prices can be defined as the prices of the shares of the various companies.
Share Brokers
Share Brokers are generally the individuals or firms who mainly buys or sells orders on behalf of the investors. Share brokers are the agents in various stock exchanges.
Share Company
The Share Company generally renders various services to the investors operating in the share market. Those companies are also called as the Share Broking Companies.
Basically, Share Market can be divided into two parts :-
1. Primary MarketIt is the market where new issues of securities are offered to the investors.
2. Secondary MarketAn investor of a secondary market buys a security from another participant of the same and not from any issuing corporation (as in case of Primary Market).
Shares in the Share Market are either traded through :-
(a) Stock Exchange These are organized market places where stocks, bonds are other equivalents are traded between the buyers and sellers where exchange acts as a counter-party to both the participants in case of any default. The contracts are standardized and not customized ones. For example, NYSE, NASDAQ, NSE, NIKKEI, etc.
(b) Over-the -Counter (OTC)These are not centralized exchanges. Here, the trade takes place through a network of dealers. Generally, the OTC contracts are bilateral customized contracts and not standardized ones.
Earnings Per Share
Earnings Per Share or EPS can be defined as the profit portion of the company mainly allocated to the outstanding share. Find in detailed about EPS.
Share Prices
In the secondary market, the share prices can be defined as the prices of the shares of the various companies.
Share Brokers
Share Brokers are generally the individuals or firms who mainly buys or sells orders on behalf of the investors. Share brokers are the agents in various stock exchanges.
Share Company
The Share Company generally renders various services to the investors operating in the share market. Those companies are also called as the Share Broking Companies.
Savings Bonds
Savings bonds are debt instruments issued by the government. While a savings bond is considered a safe investment, it offers a very low rate of interest as compared to other investment options, such as equities.
The US Department of the Treasury issues savings bonds. The interest rates offered on such bonds are subject to change every May and November, based on the current market rates and/or inflation.
Saving Bonds: Procedure
US savings bonds can be acquired from commercial banks, most of which act as agents for the Treasury. They can also be purchased through your employer (through payroll deductions) and over the Internet. A savings bond may be registered in the name of a single person, two people or a primary owner and a beneficiary. These are known as single ownership, co-ownership and beneficiary savings bonds, respectively. At the time of maturity, savings bonds can be redeemed at various banks or any of the branches of the Federal Reserve.
It is important to keep a record of the serial numbers, issue dates and denominations of the savings bonds in case they are lost, stolen or accidentally destroyed. This information will need to be submitted to the Department of the Treasury to ensurethat your bonds are replaced.
Types of Savings Bonds
The two main types of savings bonds are:
Series EE bonds: These savings bonds have a 30-year maturity period. Series EE bonds are typically sold at half their parvalue. While they are guaranteed to become worth their face value by the end of the term, this may happen much earlier, following which they continue to gain value. The principal is repaid, along with the interest, as a lump sum at the end of the term.
Series I bonds: These savings bonds are sold at their par value. They offer a fixed interest rate and an inflation premium. Series I bonds are designed for hedging inflation, with the premium protecting the purchasing power of the principal.
Advantages of Savings Bonds
The advantages of savings bonds are:
* Offer a higher interest rate than savings accounts.
* Absolute relief from local and state taxes.
* Nominal level of initial capital investment.
* Freedom from paying commission to brokers.
* Assured returns and no threat from a turbulent market.
Drawbacks of Savings Bonds
The drawbacks of savings bonds are:
* An investor receives only fixed interest on the capital invested. There is no option of capital gains from market swings.
* Low interest rate as compared to other investment options.
* Non transferable and do not have the status of an interest bearing security.
* Cannot be offered as collateral when applying for loans.
* Not liquid and do not have a secondary market.
Since the interest rates are typically low on savings bonds, they are a good investment option only for the medium term. Savings bonds are typically not favored by investors with longer horizons (more than twenty years).
The US Department of the Treasury issues savings bonds. The interest rates offered on such bonds are subject to change every May and November, based on the current market rates and/or inflation.
Saving Bonds: Procedure
US savings bonds can be acquired from commercial banks, most of which act as agents for the Treasury. They can also be purchased through your employer (through payroll deductions) and over the Internet. A savings bond may be registered in the name of a single person, two people or a primary owner and a beneficiary. These are known as single ownership, co-ownership and beneficiary savings bonds, respectively. At the time of maturity, savings bonds can be redeemed at various banks or any of the branches of the Federal Reserve.
It is important to keep a record of the serial numbers, issue dates and denominations of the savings bonds in case they are lost, stolen or accidentally destroyed. This information will need to be submitted to the Department of the Treasury to ensurethat your bonds are replaced.
Types of Savings Bonds
The two main types of savings bonds are:
Series EE bonds: These savings bonds have a 30-year maturity period. Series EE bonds are typically sold at half their parvalue. While they are guaranteed to become worth their face value by the end of the term, this may happen much earlier, following which they continue to gain value. The principal is repaid, along with the interest, as a lump sum at the end of the term.
Series I bonds: These savings bonds are sold at their par value. They offer a fixed interest rate and an inflation premium. Series I bonds are designed for hedging inflation, with the premium protecting the purchasing power of the principal.
Advantages of Savings Bonds
The advantages of savings bonds are:
* Offer a higher interest rate than savings accounts.
* Absolute relief from local and state taxes.
* Nominal level of initial capital investment.
* Freedom from paying commission to brokers.
* Assured returns and no threat from a turbulent market.
Drawbacks of Savings Bonds
The drawbacks of savings bonds are:
* An investor receives only fixed interest on the capital invested. There is no option of capital gains from market swings.
* Low interest rate as compared to other investment options.
* Non transferable and do not have the status of an interest bearing security.
* Cannot be offered as collateral when applying for loans.
* Not liquid and do not have a secondary market.
Since the interest rates are typically low on savings bonds, they are a good investment option only for the medium term. Savings bonds are typically not favored by investors with longer horizons (more than twenty years).
Real Estate Market
Real Estate Market is the market where exchange of real estate property takes place between buyers and sellers. This real estate property is of two types-Commercial Real Estate Property and Residential Real Estate Property. Based on these two types of real estate property, Real Estate Market can be classified into Commercial Real Estate Market and Residential Real Estate Market. In the Commercial Real Estate Market, purchase and sell of real estate property like office buildings, office complexes, industrial premises, retail spaces take place. In the Residential Real Estate Market, purchase and sell of real estate property like houses, bungalows, condominiums, duplex homes take place.
Main Participants of Real Estate Market
* Owners-Owners purchase commercial or residential real estate property and use them for business or office purposes and for living purposes respectively.
* Investors-Investors purchase real estate property but they don’t use the property personally. They rent out or lease out the property. Sometimes they buy the commercial or residential real estate property only to earn profit by selling them in the future at higher prices.
* Renter-Renter is a person or a business house that consumes a residential or commercial real estate property by paying rent to the owner of the property.
* Builders-These people acquire lands and build the offices, houses and all other types of commercial and residential property on raw land.
* Renovators-These people renovate old real estate properties and sell them in the market.
* Facilitator-These are the banks, real estate brokers, lawyers and other persons who facilitate the process of buying and selling real estate property.
Demand and Supply in Real Estate Market
The total demand of real estate market is generated by the demand of owners, investors and renters for real estate property. And the total supply of real estate market comes from the builders and renovators.
Main Characteristics of Real Estate Market
* Durability-Real Estate Property last for long time. So, the major part of the supply of real estate property comes from existing real estate property and a minor part comes from the new developed ones. To determine the total supply of a period, one has to consider the following things:
1. Existing stock of real estate property
2. The rate of deterioration of the existing stock
3. The rate of renovation of the existing stock
4. The rate of new development of real estate property
* Immovability-Real Estate Property is immovable in nature. For this reason no physical marketplace exists in the Real Estate Market.
* High Transaction Cost-High transaction cost is associated with Real Estate Property. The search fees, legal fees, registration fees and other different kind of fees sum up to a reasonably high amount.
* Uniqueness-Every real estate property is unique from the point of location, quality and financing.
* Consumption Good cum Investment Good-Real estate property can be purchased for own consumption or for investment purpose with the aim of earning a high return by selling it in the future.
* Lengthy Transaction Process-The financing, the construction work and the deal associated with purchase of real estate property takes long time to be completed.
Real Estate Market Investment
Investment in the real estate market is taking place at a larger extent as the demand for housing is rising very fast these days:
Main Participants of Real Estate Market
* Owners-Owners purchase commercial or residential real estate property and use them for business or office purposes and for living purposes respectively.
* Investors-Investors purchase real estate property but they don’t use the property personally. They rent out or lease out the property. Sometimes they buy the commercial or residential real estate property only to earn profit by selling them in the future at higher prices.
* Renter-Renter is a person or a business house that consumes a residential or commercial real estate property by paying rent to the owner of the property.
* Builders-These people acquire lands and build the offices, houses and all other types of commercial and residential property on raw land.
* Renovators-These people renovate old real estate properties and sell them in the market.
* Facilitator-These are the banks, real estate brokers, lawyers and other persons who facilitate the process of buying and selling real estate property.
Demand and Supply in Real Estate Market
The total demand of real estate market is generated by the demand of owners, investors and renters for real estate property. And the total supply of real estate market comes from the builders and renovators.
Main Characteristics of Real Estate Market
* Durability-Real Estate Property last for long time. So, the major part of the supply of real estate property comes from existing real estate property and a minor part comes from the new developed ones. To determine the total supply of a period, one has to consider the following things:
1. Existing stock of real estate property
2. The rate of deterioration of the existing stock
3. The rate of renovation of the existing stock
4. The rate of new development of real estate property
* Immovability-Real Estate Property is immovable in nature. For this reason no physical marketplace exists in the Real Estate Market.
* High Transaction Cost-High transaction cost is associated with Real Estate Property. The search fees, legal fees, registration fees and other different kind of fees sum up to a reasonably high amount.
* Uniqueness-Every real estate property is unique from the point of location, quality and financing.
* Consumption Good cum Investment Good-Real estate property can be purchased for own consumption or for investment purpose with the aim of earning a high return by selling it in the future.
* Lengthy Transaction Process-The financing, the construction work and the deal associated with purchase of real estate property takes long time to be completed.
Real Estate Market Investment
Investment in the real estate market is taking place at a larger extent as the demand for housing is rising very fast these days:
Municipal Bonds
Municipal bonds are debt instruments that are issued by public entities, such as municipalities, cities, states or counties, to fund their capital expenditures. The capital expenditure of public entities includes costs associated with the construction of schools, bridges, highways and other public interest projects. Since muni bonds offer tax exemptions, they aretypically bought by investors who belong to the high income-tax bracket.
How Do Municipal Bonds Work?
Municipal bonds are issued directly to investors to meet instant cash requirements. Bond issuers must spend the cash generatedthrough the issuance of these bonds either instantly or over a period of five years from the date of issue.
When an investor buys a municipal bond, s/he is lending money to the issuing authority. In return, the issuing authority guarantees to repay the principle amount along with a specific interest. The interest is remitted either on a periodic basis or as a lump sum (along with the principal) on bond maturity.
While investing in municipal bonds, an investor should consider the following factors:
* Buy those munis that have a high interest rate.
* Evaluate the demand for the bond prevailing in the market. The greater the demand, the higher will be the returns.
* Analyze bond ratings issued by Moody's and Standard & Poor’s.
* Evaluate the financial health of the issuer.
The Most Popular Municipal Bonds
The four most common types of municipal bonds are:
* General Obligation (GO) Bonds: These are the most common type and the least risky municipal bonds. They are also the ones that offer the lowest yield. GO bonds are not tied to a particular project and the issuer is obligated to pay the interest and repay the principal on time.
* Revenue Bonds: These bonds are backed only by the prospective stream of revenues from the facility being built, such ashighway tolls. They are riskier and offer higher yields than GO bonds.
* Commercial Papers: These are debt instruments issued by governments to meet short-term cash requirements. These usually maturein less than nine months and are backed by a letter of credit from a bank. Commercial papers offer low yields.
* Private Activity Bonds: These are used to raise funds for private ventures that have a tax-exempt status given by federal law. They are riskier and offer higher yields than GO and revenue bonds.
Municipal Bonds: Benefits
Municipal bonds help:
* Generate consistent and relatively risk-free cash flows.
* Receive tax deductions as these bonds are exempted from most federal, state and local taxes.
Municipal Bonds: Dangers
Municipal bonds are prone to the following risks:
* Market risk: If the market interest rate rises, newly issued bonds offer a higher yield than that offered by existing bonds. In such cases, investors will buy an old municipal bond only if it is offered at a discount. So, while selling the bond, abondholder might receive a price that is lower than the purchase price. However, investors holding their bonds till maturity arenot exposed to this risk.
* Interest-rate risk: Municipal bonds generally have a fixed interest rate. Hence, the yield of existing municipal bonds willnot improve if the market interest rate rises. This impacts the demand for existing municipal bonds.
How Do Municipal Bonds Work?
Municipal bonds are issued directly to investors to meet instant cash requirements. Bond issuers must spend the cash generatedthrough the issuance of these bonds either instantly or over a period of five years from the date of issue.
When an investor buys a municipal bond, s/he is lending money to the issuing authority. In return, the issuing authority guarantees to repay the principle amount along with a specific interest. The interest is remitted either on a periodic basis or as a lump sum (along with the principal) on bond maturity.
While investing in municipal bonds, an investor should consider the following factors:
* Buy those munis that have a high interest rate.
* Evaluate the demand for the bond prevailing in the market. The greater the demand, the higher will be the returns.
* Analyze bond ratings issued by Moody's and Standard & Poor’s.
* Evaluate the financial health of the issuer.
The Most Popular Municipal Bonds
The four most common types of municipal bonds are:
* General Obligation (GO) Bonds: These are the most common type and the least risky municipal bonds. They are also the ones that offer the lowest yield. GO bonds are not tied to a particular project and the issuer is obligated to pay the interest and repay the principal on time.
* Revenue Bonds: These bonds are backed only by the prospective stream of revenues from the facility being built, such ashighway tolls. They are riskier and offer higher yields than GO bonds.
* Commercial Papers: These are debt instruments issued by governments to meet short-term cash requirements. These usually maturein less than nine months and are backed by a letter of credit from a bank. Commercial papers offer low yields.
* Private Activity Bonds: These are used to raise funds for private ventures that have a tax-exempt status given by federal law. They are riskier and offer higher yields than GO and revenue bonds.
Municipal Bonds: Benefits
Municipal bonds help:
* Generate consistent and relatively risk-free cash flows.
* Receive tax deductions as these bonds are exempted from most federal, state and local taxes.
Municipal Bonds: Dangers
Municipal bonds are prone to the following risks:
* Market risk: If the market interest rate rises, newly issued bonds offer a higher yield than that offered by existing bonds. In such cases, investors will buy an old municipal bond only if it is offered at a discount. So, while selling the bond, abondholder might receive a price that is lower than the purchase price. However, investors holding their bonds till maturity arenot exposed to this risk.
* Interest-rate risk: Municipal bonds generally have a fixed interest rate. Hence, the yield of existing municipal bonds willnot improve if the market interest rate rises. This impacts the demand for existing municipal bonds.
Money Market
Money markets fulfill the short-term monetary requirements of corporations, the government, banks and other financial institutions. The maturity of these short-term loans is usually up to thirteen months.
Money markets use different instruments, such as bankers’ acceptances, Treasury bills, commercial papers and repurchase agreements, to borrow or lend money. These instruments are mostly influenced by the central bank’s policies, inflation and the rates of interest. The interest rates on these instruments are usually based on the LIBOR (London Interbank Offered Rate).
Money Market Instruments
Money markets impact economies by providing the necessary funds to large institutions. This, in turn, helps in maintaining the liquidity-profit balance. Popular money market instruments include:
* Bankers’ acceptance: These are bank drafts and are extremely safe investments.
* Certificates of deposit (CDs): These are deposits made in a bank for a fixed term. These are also issued by credit union and thrifts to raise immediate funds. Since investments in CDs are time bound, they offer a higher interest rate. CDs of high denominations may be sold before the expiry of the term.
* Commercial papers: These are unsecured notes issued by large corporations with high creditworthiness and banks to fulfill their short-term obligations. These papers are not backed by banks and hence are sold at a discount to their face value. Commercial papers have a lock-in period of up to 270 days.
* Federal agency short-term securities: These are securities, such as the Farm Credit System and the Federal Home Loan Banks, which are issued by the US government.
* Other US government bodies also issue papers, such as municipal notes and Treasury bills, to obtain funds to repay the debt liabilities and immediate expenses.
Risk in Money Markets
Instruments in the money markets vary in terms of their risk quotient. When arranged in the increasing order of risk, treasury bills come first, followed by banker’s acceptances, certificates of deposits and commercial papers. However, instruments with the lowest risk also offer the lowest returns.
The money market attracts risk-averse lenders. This is because the borrowers are all big names and trade securities that are associated with low risk and high liquidity, albeit at a low yield.
Money markets use different instruments, such as bankers’ acceptances, Treasury bills, commercial papers and repurchase agreements, to borrow or lend money. These instruments are mostly influenced by the central bank’s policies, inflation and the rates of interest. The interest rates on these instruments are usually based on the LIBOR (London Interbank Offered Rate).
Money Market Instruments
Money markets impact economies by providing the necessary funds to large institutions. This, in turn, helps in maintaining the liquidity-profit balance. Popular money market instruments include:
* Bankers’ acceptance: These are bank drafts and are extremely safe investments.
* Certificates of deposit (CDs): These are deposits made in a bank for a fixed term. These are also issued by credit union and thrifts to raise immediate funds. Since investments in CDs are time bound, they offer a higher interest rate. CDs of high denominations may be sold before the expiry of the term.
* Commercial papers: These are unsecured notes issued by large corporations with high creditworthiness and banks to fulfill their short-term obligations. These papers are not backed by banks and hence are sold at a discount to their face value. Commercial papers have a lock-in period of up to 270 days.
* Federal agency short-term securities: These are securities, such as the Farm Credit System and the Federal Home Loan Banks, which are issued by the US government.
* Other US government bodies also issue papers, such as municipal notes and Treasury bills, to obtain funds to repay the debt liabilities and immediate expenses.
Risk in Money Markets
Instruments in the money markets vary in terms of their risk quotient. When arranged in the increasing order of risk, treasury bills come first, followed by banker’s acceptances, certificates of deposits and commercial papers. However, instruments with the lowest risk also offer the lowest returns.
The money market attracts risk-averse lenders. This is because the borrowers are all big names and trade securities that are associated with low risk and high liquidity, albeit at a low yield.
Mergers and Acquisitions
Mergers
Merger is a financial tool that is used for enhancing long-term profitability by expanding their operations. Mergers occur when the merging companies have their mutual consent as different from acquisitions, which can take the form of a hostile takeover.
The business laws in US vary across states and hence the companies have limited options to protect themselves from hostile takeovers. One way a company can protect itself from hostile takeovers is by planning shareholders rights, which is alternatively known as - poison pill. If we trace back to history, it is observed that very few mergers have actually added to the share value of the acquiring company. Corporate mergers may promote monopolistic practices by reducing costs, taxes etc.
Such activities may go against public welfare. Hence mergers are regulated d supervised by the government, for instance, in US any merger required\s the prior approval of the Federal Trade Commission and the Department of Justice. In US regulation son mergers began with the Sherman Act in 1890.
Mergers may be horizontal, vertical, conglomerate or congeneric, depending or the nature of the merging companies.
Acquisitions
Acquisitions or takeovers occur between the bidding and the target company. There may be either hostile or friendly takeovers. Reverse takeover occurs when the target firm is larger than the bidding firm. In the course of acquisitions the bidder may purchase the share or the assets of the target company.
Merger is a financial tool that is used for enhancing long-term profitability by expanding their operations. Mergers occur when the merging companies have their mutual consent as different from acquisitions, which can take the form of a hostile takeover.
The business laws in US vary across states and hence the companies have limited options to protect themselves from hostile takeovers. One way a company can protect itself from hostile takeovers is by planning shareholders rights, which is alternatively known as - poison pill. If we trace back to history, it is observed that very few mergers have actually added to the share value of the acquiring company. Corporate mergers may promote monopolistic practices by reducing costs, taxes etc.
Such activities may go against public welfare. Hence mergers are regulated d supervised by the government, for instance, in US any merger required\s the prior approval of the Federal Trade Commission and the Department of Justice. In US regulation son mergers began with the Sherman Act in 1890.
Mergers may be horizontal, vertical, conglomerate or congeneric, depending or the nature of the merging companies.
Acquisitions
Acquisitions or takeovers occur between the bidding and the target company. There may be either hostile or friendly takeovers. Reverse takeover occurs when the target firm is larger than the bidding firm. In the course of acquisitions the bidder may purchase the share or the assets of the target company.
Investment
Investment refers to the concept of deferred consumption, which involves purchasing an asset, giving a loan or keeping funds in a bank account with the aim of generating future returns. Various investment options are available, offering differing risk-reward trade offs. An understanding of the core concepts and a thorough analysis of the options can help an investor create a portfolio that maximizes returns while minimizing risk exposure.
Types of Investments
The various types of investment are:
* Cash investments: These include savings bank accounts, certificates of deposit (CDs) and treasury bills. These investments pay a low rate of interest and are risky options in periods of inflation.
* Debt securities: This form of investment provides returns in the form of fixed periodic payments and possible capital appreciation at maturity. It is a safer and more 'risk-free' investment tool than equities. However, the returns are also generally lower than other securities.
* Stocks: Buying stocks (also called equities) makes you a part-owner of the business and entitles you to a share of the profits generated by the company. Stocks are more volatile and riskier than bonds.
* Mutual funds: This is a collection of stocks and bonds and involves paying a professional manager to select specific securities for you. The prime advantage of this investment is that you do not have to bother with tracking the investment. There may be bond, stock- or index-based mutual funds.
* Derivatives: These are financial contracts the values of which are derived from the value of the underlying assets, such as equities, commodities and bonds, on which they are based. Derivatives can be in the form of futures, options and swaps. Derivatives are used to minimize the risk of loss resulting from fluctuations in the value of the underlying assets (hedging).
* Commodities: The items that are traded on the commodities market are agricultural and industrial commodities. These items need to be standardized and must be in a basic, raw and unprocessed state. The trading of commodities is associated with high risk and high reward. Trading in commodity futures requires specialized knowledge and in-depth analysis.
* Real estate: This investment involves a long-term commitment of funds and gains that are generated through rental or lease income as well as capital appreciation. This includes investments into residential or commercial properties.
Further Resources
Adhere to trusted wealth management practices from top firms like GoldenTree Asset Management, LP.
Gain Free access to reports previously only available to Governments and select Intelligence agencies. These reports are part of the OilPrice.com Intelligence Newsletter that focuses on: Geopolitics, Economics, Energy Issues, Conflicts, Crude Oil, Gold & Many other topics. Their information is sourced through a wide network of contacts and is not available from traditional news outlets and data providers.
Types of Investments
The various types of investment are:
* Cash investments: These include savings bank accounts, certificates of deposit (CDs) and treasury bills. These investments pay a low rate of interest and are risky options in periods of inflation.
* Debt securities: This form of investment provides returns in the form of fixed periodic payments and possible capital appreciation at maturity. It is a safer and more 'risk-free' investment tool than equities. However, the returns are also generally lower than other securities.
* Stocks: Buying stocks (also called equities) makes you a part-owner of the business and entitles you to a share of the profits generated by the company. Stocks are more volatile and riskier than bonds.
* Mutual funds: This is a collection of stocks and bonds and involves paying a professional manager to select specific securities for you. The prime advantage of this investment is that you do not have to bother with tracking the investment. There may be bond, stock- or index-based mutual funds.
* Derivatives: These are financial contracts the values of which are derived from the value of the underlying assets, such as equities, commodities and bonds, on which they are based. Derivatives can be in the form of futures, options and swaps. Derivatives are used to minimize the risk of loss resulting from fluctuations in the value of the underlying assets (hedging).
* Commodities: The items that are traded on the commodities market are agricultural and industrial commodities. These items need to be standardized and must be in a basic, raw and unprocessed state. The trading of commodities is associated with high risk and high reward. Trading in commodity futures requires specialized knowledge and in-depth analysis.
* Real estate: This investment involves a long-term commitment of funds and gains that are generated through rental or lease income as well as capital appreciation. This includes investments into residential or commercial properties.
Further Resources
Adhere to trusted wealth management practices from top firms like GoldenTree Asset Management, LP.
Gain Free access to reports previously only available to Governments and select Intelligence agencies. These reports are part of the OilPrice.com Intelligence Newsletter that focuses on: Geopolitics, Economics, Energy Issues, Conflicts, Crude Oil, Gold & Many other topics. Their information is sourced through a wide network of contacts and is not available from traditional news outlets and data providers.
Government Bond
Government bonds are debt securities issued by a country’s government in its own currency. A government bond is a debt instrument that helps the government to raise capital when required. The first government bonds were issued by the British government in 1693 when it needed capital to fund its war with France.
High-quality bonds are issued by the governments of Italy, Germany, France, Japan, the UK and the US. The government bonds issued by the US Department of the Treasury are considered to be the safest and are globally accepted.
How Do Government Bonds Work?
Government bonds are valued in increments of 100 and have a maturity period of one year to 30 years. However, these bonds are generally not bought at face value and are acquired either at a premium or at a discount. A bondholder receives a fixed interestrate (also called coupon rate) during the term of the bond. The interest is typically made biannually (half-yearly payments). The entire principal amount (the face value of the bond) is received when the bond reaches its maturity date.
Instead of waiting till the maturity date to recover the principal amount, bondholders can sell their government bonds in the secondary market. Bondholders can realize a profit if the prevailing interest rate falls below the coupon rate after the bond is issued.
Benefits of Government Bonds
The benefits of government bonds include:
* These bonds regulate the nationwide circulation of cash.
* Investments in these bonds are safer than investing in the stock market.
* Negligible credit risk since government typically have the highest credit ratings.
Dangers of Government Bonds
Some of the dangers of government bonds are:
* These bonds are prone to political upheavals, coups and power turmoil in the country. These are the only circumstances when a government can default on interest payments and debt repayment.
* In case an investor purchases a bond issued by the government of a foreign country, the returns can be impaired by fluctuations in the foreign currency market.
* Inflation can significantly lower or wipe off the returns from these bonds.
* Government bonds yield lower returns than corporate bonds or equities.
High-quality bonds are issued by the governments of Italy, Germany, France, Japan, the UK and the US. The government bonds issued by the US Department of the Treasury are considered to be the safest and are globally accepted.
How Do Government Bonds Work?
Government bonds are valued in increments of 100 and have a maturity period of one year to 30 years. However, these bonds are generally not bought at face value and are acquired either at a premium or at a discount. A bondholder receives a fixed interestrate (also called coupon rate) during the term of the bond. The interest is typically made biannually (half-yearly payments). The entire principal amount (the face value of the bond) is received when the bond reaches its maturity date.
Instead of waiting till the maturity date to recover the principal amount, bondholders can sell their government bonds in the secondary market. Bondholders can realize a profit if the prevailing interest rate falls below the coupon rate after the bond is issued.
Benefits of Government Bonds
The benefits of government bonds include:
* These bonds regulate the nationwide circulation of cash.
* Investments in these bonds are safer than investing in the stock market.
* Negligible credit risk since government typically have the highest credit ratings.
Dangers of Government Bonds
Some of the dangers of government bonds are:
* These bonds are prone to political upheavals, coups and power turmoil in the country. These are the only circumstances when a government can default on interest payments and debt repayment.
* In case an investor purchases a bond issued by the government of a foreign country, the returns can be impaired by fluctuations in the foreign currency market.
* Inflation can significantly lower or wipe off the returns from these bonds.
* Government bonds yield lower returns than corporate bonds or equities.
Forex Trading
Forex trading amounts to the largest amount of financial transactions in the world. The forex market has become the cynosure of world traders. The ease of trading and the leverage offered make forex trading truly viable and lucrative. However, one should learn the various aspects of the forex market before investing. Incomplete knowledge about forex trading can cause huge losses.
Margin Forex Trading
Forex is generally traded on margins. This means that a trader can open an account at a small price and trade through it. Due to the high leverage offered, it is possible for even low deposits to yield huge profits. Most of the brokers offer margin accounts and let traders operate at as low as 1%. This means that for a trade worth $100,000, the trader only needs to deposit $1,000. Leverage works both ways, which means that it multiplies both profits and losses.
Forex Trading Quotes
Forex trading is done through quotes that indicate the rate of exchange of one currency in terms of another. For example, in the quote of USD/JPY- 94.9036/94.9040, the figures mean that by selling USD (base currency) a person will get 94.9036 JPY whereas buying a USD will cost 94.9036 JPY. The buying price is usually high and the difference between the two prices is measured in pips. In the aforementioned example, there was a 4 pip difference.
Forex Trading: Spread and Commissions
Most of the forex brokers operate without any commission. They make money through the spread differences. Spread is the quote specific to a currency pair. Even a single pip movement can amplify into big profits through leverage.
Forex Trading: Spot or Forward
Forex trading is done in two ways:
* Spot
* Forward
Spot trading is done in real time on current prices. The traders ask or bid for the currency through the trading platforms and such trades are settled within 2 days. A forward trade is a settlement made in advance for a specific date and time with a specific amount of forex.
For a successful forex trading experience, there are other factors like fundamental and technical analyses that a trader must go through incisively. Otherwise, forex trading will remain a tough investment option to master with all its vagaries and volatility.
Margin Forex Trading
Forex is generally traded on margins. This means that a trader can open an account at a small price and trade through it. Due to the high leverage offered, it is possible for even low deposits to yield huge profits. Most of the brokers offer margin accounts and let traders operate at as low as 1%. This means that for a trade worth $100,000, the trader only needs to deposit $1,000. Leverage works both ways, which means that it multiplies both profits and losses.
Forex Trading Quotes
Forex trading is done through quotes that indicate the rate of exchange of one currency in terms of another. For example, in the quote of USD/JPY- 94.9036/94.9040, the figures mean that by selling USD (base currency) a person will get 94.9036 JPY whereas buying a USD will cost 94.9036 JPY. The buying price is usually high and the difference between the two prices is measured in pips. In the aforementioned example, there was a 4 pip difference.
Forex Trading: Spread and Commissions
Most of the forex brokers operate without any commission. They make money through the spread differences. Spread is the quote specific to a currency pair. Even a single pip movement can amplify into big profits through leverage.
Forex Trading: Spot or Forward
Forex trading is done in two ways:
* Spot
* Forward
Spot trading is done in real time on current prices. The traders ask or bid for the currency through the trading platforms and such trades are settled within 2 days. A forward trade is a settlement made in advance for a specific date and time with a specific amount of forex.
For a successful forex trading experience, there are other factors like fundamental and technical analyses that a trader must go through incisively. Otherwise, forex trading will remain a tough investment option to master with all its vagaries and volatility.
Forex Education
In the business of trading currencies, forex education is essential, as it enables the potential forex trader to become familiar with:
· the forex market
· forex terminology
· how to make profits in forex trading
Forex education is based on two major methods:
· Dealing handbook:
· Simulated trading booklets:
Two Approaches of Forex Education
Forex education encompasses the two main approaches of trading.
Fundamental analysis involves:
· financial and economic theories
· political developments to determine the forces of supply and demand
· studying the causes of market movements
· helping traders to choose which currency to invest in
Technical analysis involves:
· past price and volume data to forecast future price movements
· effects of market movements
· formation of charts and formulae to capture major and minor trends
· identifying buying/selling opportunities
· assessing the extent of market turnarounds
What to Look for in Forex Education
Opt for Forex education that offers to help traders with the following:
Finding the trend. This involves:
· Identifying the prevailing/determining trend
· being aware of the overall market direction
· offering better visibility to buy effectively on the dips that occur during rising trends and sell the rallies during downward trends
Identifying the support and resistance levels. This involves:
· points where a chart experiences recurring upward or downward pressure
· points that show a tendency to reappear
Studying lines and channels. This involves:
* trend lines, which are simple, helpful tools in confirming the direction of market trends
* an upward straight line, which is drawn by connecting at least two successive lows
* interpreting the lines and future volatility
Moving averages reflect the latest average while adhering to the same time measure, which is how it got this name. Typically, it indicates the average price over a defined period of time. It helps traders avoid large losses.
· the forex market
· forex terminology
· how to make profits in forex trading
Forex education is based on two major methods:
· Dealing handbook:
· Simulated trading booklets:
Two Approaches of Forex Education
Forex education encompasses the two main approaches of trading.
Fundamental analysis involves:
· financial and economic theories
· political developments to determine the forces of supply and demand
· studying the causes of market movements
· helping traders to choose which currency to invest in
Technical analysis involves:
· past price and volume data to forecast future price movements
· effects of market movements
· formation of charts and formulae to capture major and minor trends
· identifying buying/selling opportunities
· assessing the extent of market turnarounds
What to Look for in Forex Education
Opt for Forex education that offers to help traders with the following:
Finding the trend. This involves:
· Identifying the prevailing/determining trend
· being aware of the overall market direction
· offering better visibility to buy effectively on the dips that occur during rising trends and sell the rallies during downward trends
Identifying the support and resistance levels. This involves:
· points where a chart experiences recurring upward or downward pressure
· points that show a tendency to reappear
Studying lines and channels. This involves:
* trend lines, which are simple, helpful tools in confirming the direction of market trends
* an upward straight line, which is drawn by connecting at least two successive lows
* interpreting the lines and future volatility
Moving averages reflect the latest average while adhering to the same time measure, which is how it got this name. Typically, it indicates the average price over a defined period of time. It helps traders avoid large losses.
Financial Market
Financial Market is defined as a market mechanism that allows people to buy and sell financial securities (stocks and bonds), currencies and foreign exchanges or other exchangeable items of value at low transaction costs and at prices reflecting an efficient market system. Financial markets like any other general or specialized market places interested sellers in one place thus making their task easier to find for prospective buyers. Financial markets could signify trading in financial products or the raising of capital. The relevant financial market in both the cases would be the Stock Exchange which facilitates trade in stocks, bonds and warrants. Financial markets can also mean money markets which provide for short term debts and investments as well as derivatives markets providing instruments for the management of financial risk. Futures Markets facilitating standardized forward contracts and insurance markets also come under the realm of financial markets. Financial markets is used interchangeably with capital markets which may be primary or secondary in nature depending on transactions in newly issued or existing securities. In financial market parlance, World Financial Markets or Global Financial Markets is of key importance as it is a compendium of resources for financial markets worldwide including those of the developed and the developing countries. in this context, it can be added that, development of the financial markets into a smooth and efficient body is one of the basic features concomitant with the overall development of a nation.
Derivative Market
The financial market for derivatives is known as the derivative market. The derivative market has two parts:
Exchange Traded Derivatives
Over-the-Counter derivatives.
The exchange traded derivatives are the futures and options. The futures are standardized derivative contracts. The Euronext.liffe and the Chicago Mercantile Exchange are some derivative markets, to name a few.
The Over- the- Counter derivatives
The derivatives traded over the counter are known as the over the counter derivative market. The Over the counter derivative market consists of the investment banks and include clients like hedge funds, commercial banks, government sponsored enterprises etc. The products that are traded over the counter are swaps, forward rate agreements, forward contracts, credit derivatives etc.
Derivatives are basically the financial instruments whose value is a function of the value of the underlying asset. The participants who enter into the contract do so when they agree on the exchange rate or the value of some asset to be delivered on a future date.
We may browse through the following links to have a more detailed idea of the derivative market.
Derivative Market Credit
Derivatives Market
Derivative Market Equity
Derivative market equity can be defined as the financial instruments like futures, options and swaps. Get detailed on Derivative market equity:
Derivatives Market Growth
Larger participation of the bankers, investors
and financial companies has resulted an overall growth in the derivative market. Get more on derivative market growth:
Derivative Market Size
Find the market size of the derivatives over the world. Derivative market is simply meant as the financial market
dealing with the derivatives.
Exchange Traded Derivatives
Over-the-Counter derivatives.
The exchange traded derivatives are the futures and options. The futures are standardized derivative contracts. The Euronext.liffe and the Chicago Mercantile Exchange are some derivative markets, to name a few.
The Over- the- Counter derivatives
The derivatives traded over the counter are known as the over the counter derivative market. The Over the counter derivative market consists of the investment banks and include clients like hedge funds, commercial banks, government sponsored enterprises etc. The products that are traded over the counter are swaps, forward rate agreements, forward contracts, credit derivatives etc.
Derivatives are basically the financial instruments whose value is a function of the value of the underlying asset. The participants who enter into the contract do so when they agree on the exchange rate or the value of some asset to be delivered on a future date.
We may browse through the following links to have a more detailed idea of the derivative market.
Derivative Market Credit
Derivatives Market
Derivative Market Equity
Derivative market equity can be defined as the financial instruments like futures, options and swaps. Get detailed on Derivative market equity:
Derivatives Market Growth
Larger participation of the bankers, investors
and financial companies has resulted an overall growth in the derivative market. Get more on derivative market growth:
Derivative Market Size
Find the market size of the derivatives over the world. Derivative market is simply meant as the financial market
dealing with the derivatives.
Department Of Real Estate
Department of real estate or simply DRE provides some beneficial services regarding protection and investment of real estates. Some prominent services of department of real estate include overseeing licensing activities, mortgage loans activities, enforcing laws regarding real estate etc. DRE normally controls the activities from their branch offices located at various districts of the country. Some of other activities of department of real estate are organizing projects, leasing service, industrial land leasing service, tenant service and business service.
* Real Estate Training
Real estate training enables in improving technical skills, which helps in earning more profit from the real estate business.
* Real Estate Attorney
Real estate attorney is a person who is legally authorized for performing business related transactions in the real estate market.
* Real Estate Appraiser
Real estate appraiser is a practitioner who works to estimate the value of an asset in the real estate business.
* Real Estate Book
* Real Estate Exam
* Real Estate Forms
* Real Estate Law
* Real Estate Jobs
* Real Estate School
Leading departments of real estate
Some of the leading department of real estate are California department of real estate, Arizona department of real estate
Real estate components
Real estates comprise some components like buildings, sheds (outbuilding with a single floor) and items related to that construction, i.e., anything permanently fixed to real estates.
Real estate investments
depend upon some conditions of the surroundings of the locality. Real estate investment is primarily affected by the local factors.
Objective of department of real estate
The basic objective of department of real estate comprise tax considerations and enabling the clients to acquire high yields and liquidity.
Department of real estate normally deals with real estates to generate income rather than using it as a mode of residence. The income can be achieved by renting the real estate or it can be achieved by constructing real estates.
Investment properties can be an apartment buildings or it can be a rental houses. In a rental house the owner normally do not live but use them to acquire income from the tenants of the house. Some investors invest in real estate to acquire capital gains. The value of the property normally increase over time.
Department of real estate also deals with commercial real estates like gas stations, industrial park, shopping malls or any big departmental stores of any city.
* Real Estate Training
Real estate training enables in improving technical skills, which helps in earning more profit from the real estate business.
* Real Estate Attorney
Real estate attorney is a person who is legally authorized for performing business related transactions in the real estate market.
* Real Estate Appraiser
Real estate appraiser is a practitioner who works to estimate the value of an asset in the real estate business.
* Real Estate Book
* Real Estate Exam
* Real Estate Forms
* Real Estate Law
* Real Estate Jobs
* Real Estate School
Leading departments of real estate
Some of the leading department of real estate are California department of real estate, Arizona department of real estate
Real estate components
Real estates comprise some components like buildings, sheds (outbuilding with a single floor) and items related to that construction, i.e., anything permanently fixed to real estates.
Real estate investments
depend upon some conditions of the surroundings of the locality. Real estate investment is primarily affected by the local factors.
Objective of department of real estate
The basic objective of department of real estate comprise tax considerations and enabling the clients to acquire high yields and liquidity.
Department of real estate normally deals with real estates to generate income rather than using it as a mode of residence. The income can be achieved by renting the real estate or it can be achieved by constructing real estates.
Investment properties can be an apartment buildings or it can be a rental houses. In a rental house the owner normally do not live but use them to acquire income from the tenants of the house. Some investors invest in real estate to acquire capital gains. The value of the property normally increase over time.
Department of real estate also deals with commercial real estates like gas stations, industrial park, shopping malls or any big departmental stores of any city.
Capital Market
The market where investment funds like bonds, equities and mortgages are traded is known as the capital market. The primal role of the capital market is to channelize investments from investors who have surplus funds to the ones who are running a deficit. The capital market offers both long term and overnight funds. The financial instruments that have short or medium term maturity periods are dealt in the money market whereas the financial instruments that have long maturity periods are dealt in the capital market. The different types of financial instruments that are traded in the capital markets are equity instruments, credit market instruments, insurance instruments, foreign exchange instruments, hybrid instruments and derivative instruments.
Indian Capital Market
Emerging Capital Markets
Capital Market Report
Capital Market Analyst
Indian Capital Market
Emerging Capital Markets
Capital Market Report
Capital Market Analyst
Call Option
A call option is a contract between two parties to transfer ownership of a stock at a specified price within a specified time period. A call option is also known simply as a ‘call.’ The price that the parties agree on is termed as the strike price. The date on which the agreement expires is called the expiration date of the call option. Though call options enable a buyer with the right to buy the underlying share, there is no obligation to buy it.
The seller of the contract is also known as the writer. The payment that is paid to the writer by the buyer of the call option is known as the premium.
Trading a Call Option
The specification of the trade may differ from exchange to exchange. They may also depend upon the option style. For instance, a US call option can be exercised at any point of time during life of a call option while a European call option can be exercised only on the expiration date.
Value of a Call Option
When the price of the underlying instrument goes up and gets closer to the strike price, that situation is most profitable for the buyer of the call options. When this price exceeds the strike price, the option is said to be ‘in the money.’
Strategies of Call Options
A covered call option refers to a strategy in which the seller of the call option is the owner of that underlying stock. So, the seller is provided a ‘cover’ by these shares in case the buyer of the option decides to buy the underlying instrument.
A naked call option is a highly risky and speculative strategy in which a speculator sells a call option on a stock without the actual ownership of that stock. The expectation of the speculator is that the price of the call option will increase. If it increases even by a dollar, the rate of return on the investment is very high. So, a naked call option is ranked among the riskiest strategies because the seller does not own the stock and is exposed to unlimited risk.
The seller of the contract is also known as the writer. The payment that is paid to the writer by the buyer of the call option is known as the premium.
Trading a Call Option
The specification of the trade may differ from exchange to exchange. They may also depend upon the option style. For instance, a US call option can be exercised at any point of time during life of a call option while a European call option can be exercised only on the expiration date.
Value of a Call Option
When the price of the underlying instrument goes up and gets closer to the strike price, that situation is most profitable for the buyer of the call options. When this price exceeds the strike price, the option is said to be ‘in the money.’
Strategies of Call Options
A covered call option refers to a strategy in which the seller of the call option is the owner of that underlying stock. So, the seller is provided a ‘cover’ by these shares in case the buyer of the option decides to buy the underlying instrument.
A naked call option is a highly risky and speculative strategy in which a speculator sells a call option on a stock without the actual ownership of that stock. The expectation of the speculator is that the price of the call option will increase. If it increases even by a dollar, the rate of return on the investment is very high. So, a naked call option is ranked among the riskiest strategies because the seller does not own the stock and is exposed to unlimited risk.
Bond Futures
Bond futures are contracts that place a contract holder under an obligation to buy or sell a bond on a specified date and price which is determined at the time of the purchase. Bond futures have bonds as underlying assets, which are debts that are repayable on the date of maturity date in compliance with the contracts. Bond futures are traded on a futures exchange.
How are Bond Futures Traded?
Bond futures are highly standardized to ensure a certain level of consistency and equality. This standardization is done by a regulating agency. Bond futures are traded in the same way as other futures contracts. They are purchased in lots against the payment of marginal amount value. Generally, the marginal amount value is 10% to 15% of the actual price of the traded bonds. The size of the lot and the marginal value is specific to each type of bond. They are set by the relevant futures exchange.
Investors can realize profits or suffer losses based on fluctuations in the price of the bond. Profits are calculated on a daily basis until the bond is sold or the contract expires.
What are Government Bond Futures?
A government bond futures contract allows an investor to purchase a theoretical government bond at a specific price at a pre-determined date. At the time, the underlying bond is not physically available for purchase. It is a notional bond but its value is dependent on the total number of government bonds that are available in the market. Although government bond futures are highly complex, they are amongst the most traded futures contracts.
Some of the most popular government bond futures are:
* US Treasury bond Futures (also called T Bond Futures).
* Germany Bund Futures (Euro denominated).
* Gilt Futures UK (British Pound denominated).
* Notional contracts, France (Euro denominated).
Benefits of Bond Futures
* Involve lower brokerage as compared to bond trading.
* While trading in bond futures, you only need to pay the margin amount as compared to the entire market bond price when trading in bonds..
Risks of Bond Futures
Bond futures are inherently risky. Their prices may change drastically between the date of the agreement and the date on which the contract is exercised.
How are Bond Futures Traded?
Bond futures are highly standardized to ensure a certain level of consistency and equality. This standardization is done by a regulating agency. Bond futures are traded in the same way as other futures contracts. They are purchased in lots against the payment of marginal amount value. Generally, the marginal amount value is 10% to 15% of the actual price of the traded bonds. The size of the lot and the marginal value is specific to each type of bond. They are set by the relevant futures exchange.
Investors can realize profits or suffer losses based on fluctuations in the price of the bond. Profits are calculated on a daily basis until the bond is sold or the contract expires.
What are Government Bond Futures?
A government bond futures contract allows an investor to purchase a theoretical government bond at a specific price at a pre-determined date. At the time, the underlying bond is not physically available for purchase. It is a notional bond but its value is dependent on the total number of government bonds that are available in the market. Although government bond futures are highly complex, they are amongst the most traded futures contracts.
Some of the most popular government bond futures are:
* US Treasury bond Futures (also called T Bond Futures).
* Germany Bund Futures (Euro denominated).
* Gilt Futures UK (British Pound denominated).
* Notional contracts, France (Euro denominated).
Benefits of Bond Futures
* Involve lower brokerage as compared to bond trading.
* While trading in bond futures, you only need to pay the margin amount as compared to the entire market bond price when trading in bonds..
Risks of Bond Futures
Bond futures are inherently risky. Their prices may change drastically between the date of the agreement and the date on which the contract is exercised.
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