lecture 02 various forms of securities

8/13/2019 Lecture 02 Various Forms of Securities

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Direct InvestmentInvestor buy and sell securities themselvesthrough the brokers.

Indirect Investment

The investor buy and sell the shares ofinvestment companies. The companies that

hold the portfolio of securities



Direct Investment◦ Non Marketable Securities

◦ Money market securities

◦ Capital market securities

◦ Derivative securities

Indirect Investment

◦ Investment Companies

Open Ended

Closed Ended

Unit Investment Trust



2

Any type of security that is not trade on anormal market or exchange. Such types offinancial assets trade over the counter(OTC) or in a private transaction.

A security that may not be bought or sold.

Low-risk instruments

Nonnegotiable securities and non tradable

securities.



Savings accounts and bonds.

Non-negotiable certificates of deposit(NCDs)

Money market deposit accounts(MMDAs)

Represent direct exchange of claimsbetween issuer and investor

Usually “safe” investments…… Why?

Concept of Liquidity



Money Market◦ short term, highly liquid, low risk, assets.

Some types of MMS’s

Treasury Bills

Commercial Papers

Negotiable Certificates of Deposits (CD’s)

Eurodollars

Repurchase Agreements (Rps)

Bankers Acceptance



Discount Yield◦ T-Bills are issued at discount and redeemed at the

face value. The investor gets the return at maturity.

Investment Yield◦ It is calculated to relate and measure the

deficiencies in the discount yield.



Capital market is a place for long termsecurities like stocks and bonds

In Capital markets we have fixed incomesecurities, equities, and derivative securities

Fixed Income Securities

◦ Bonds (Long term debt instrument)



Par value of a Bond Zero coupon bond

Treasury bond

Treasury Inflation Index Securities Municipal bonds

Corporate bonds

Convertible bonds

Debenture (Credit worthyness) Junk bond (High yield and High risk)



Mortgage backed securitiesPool of securities based on mortgage packedtogether for portfolio

Asset backed securities

Securities issued against some type of asset.These are less risky securities.

It is called as securitization or structuredfinance.



Why Rates on Fixed Income securities are

different?



Preferred Stocks◦ Cumulative preferred stock

◦ Participating preferred stock

◦ Convertible preferred stock

◦ Callable preferred stock◦ Adjustable-rate preferred stock

Common Stocks◦ Par Value

◦ Cash Dividend◦ Stock Dividend/Bonus Issue/ Right Issue

◦ Stock Split



◦ Dividend Yield

◦ Payout Ratio

Derivative Securities Warrant

Options

Call

Put



What are the various tools used for investing

in equities internationally? Quote example ofPakistan.

Short 2 pages assignment.

lecture 02 various forms of securities

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