Financial markets (Coursera)

39 flashcards · Economics · by charlie42

1. yield to maturity

   return on a bond, (sum(principal+coupons)/investment)−1(sum (principal+coupons) / investment) - 1(sum(principal+coupons)/investment)−1

2. liquidity

   availability

3. annuity

   a bond that pays interest forever, without ever repaying the principal amount

4. short term obligations

   bills

5. long term obligations

   bonds

6. why inflation less bad for stock holders than bond holders

   companies can adjust prices and increase profit

7. market cap

   market capitalization

8. Market capitalization is equal to the

   share price multiplied by the number of shares outstanding

9. value stocks

   stocks of a "bad" company

10. growth stocks

    stocks of a "good" company

11. sovereign bonds

    government bonds

12. bond denomination

    which currency it's in

13. fiat currency

    currency not backed by gold (e.g. US dollar)

14. current account deficit

    more imported than exported

15. assets not correlated with stocks (diversification)

    gold, real estate

16. alpha

    return on investment (compared to benchmark, e.g. market index)

17. beta

    relative volatility of an investment (indication of relative risk)

18. arbitrage

    Arbitrage is the simultaneous purchase and sale of the same asset in different markets in order to profit from tiny differences in the asset's listed price.

19. When a new merger is announced, typically the target price ...

    rises

20. merger arbitrage

    long target, short acquirer

21. Spread trades

    are the act of purchasing one security and selling another related security as a unit

22. another word for spread trade

    relative value trade

23. why merger arbitrage profitable

    rare that merger fails, large rare losses > small frequent gains

24. fixed-income arbitrage

    betting that one bond will outperform another, regardless of general direction of bond market (long winning bond, short losing bond)

25. convertible bond

    can be converted to stocks

26. statistical arbitrage

    long recent losers, short recent winners

27. (P/E) Ratio

    price to earning ratio

28. A high P/E ratio could mean that a company's stock is over-valued, or else that investors are expecting high growth rates in the future.

    price to earning ratio

29. Private equity is an alternative investment class and consists of capital that is not listed on a public exchange.

30. Formula and Calculation of Sharpe Ratio

31. Alpha is a term used in investing to describe an investment strategy's ability to beat the market, or its "edge." It is often used in conjunction with beta which measures the broad market's overall volatility or risk, known as systematic market risk.

32. Alpha is often referred to as “excess return” or “abnormal rate of return,” which refers to the idea that markets are efficient, and so there is no way to systematically earn returns that exceed the broad market as a whole.

33. The father of the efficient-market hypothesis

    Eugene Fama

34. B beta of 1.0 indicates that if the market goes up 10%, the portfolio would be expected to go up

    10%

35. The possibility of a loss resulting from a borrower's failure to repay a loan or meet contractual obligations.

    Credit risk

36. The term hot money refers to investors who are

    always pursuing the funds doing well recently and leaving those doing poorly.

37. The investment return an asset is expected to yield in excess of the risk-free rate of return.

    Risk premium

38. Risk premium compensates for what?

    For the risk they undertake when making an investment

39. The premium investors expect to make for taking on the relatively higher risk of buying stocks.

    The equity risk premium