Investment Analysis and Portfolio Management intro
and term definition
Investment -: Commitment of current resources in the expectation of deriving greater
resources in the future. [Sacrificing something of value now, expecting to benefit from
the sacrifice later]
Real assets -: Assets (like land, buildings, equipment and knowledge) used to produce
goods and services.
Financial Assets -: Claims on real assets or the income generated by them. The
successes or failure of the financial assets we choose to purchase ultimately depend on
the performance of the underlying real assets.
Fixed-income (debt) securities -: Pay a specified cash flow over a specific period.
Equity -: An ownership share in a corporation.
Derivative securities -: Securities providing payoffs that depend on the values of other
assets.
Agency problems -: Conflicts of interest between managers and stockholders.
Asset allocation -: Allocation of an investment portfolio across broad asset classes.
Security selection -: Choice of specific securities within each asset class.
Security analysis -: Analysis of the value of securities.
Risk-return trade-off -: Assets with higher expected returns entail greater risk.
Passive management -: Buying and holding a diversified portfolio without attempting to
identify mispriced securities.
Active management -: Attempting to identifying mispriced securities or to forecast
broad market trends.
Financial intermediaries -: institutions that "connect" borrowers and lenders by
accepting funds from lenders and loaning funds to borrowers.
Investment companies -: firms managing funds for investors. An investment company
may manage several mutual funds.
, Investment bankers -: Firms specializing in the sale of new securities to the public,
typically by underwriting the issue.
Primary market -: A market in which new issues of securities are offered to the public.
Secondary market -: Previously issued securities are trade among investors.
Venture capital (VC) -: Money invested to finance a new firm.
Private equity -: Investments in companies that are not trade on a stock exchange.
Money markets -: Include short-term, highly liquid, and relatively low-risk debt
instruments.
Treasury bills -: Short-term government securities issued at a discount from face value
and returning the face amount at maturity.
Certificate of deposit -: A bank time deposit.
Commercial paper -: Short-term unsecured debt issued by large corporations.
Bankers' acceptance -: An order to a bank by a customer to pay a sum of money at a
future date. (like a postdated check)
Eurodollars -: Dollar-denominated deposits at foreign banks or foreign branches of
American banks.
Repurchase agreements -: Short-term sales of securities with an agreement to
repurchase the securities at a higher price. (usually on the next day)
Term Repo -: Essentially identical transaction except that term can be 30 days or more
Federal funds -: Funds in the accounts of commercial banks at the Federal Reserve
Bank.
LIBOR (London Interbank Offer Rate) -: Lending rate among banks in the London
market.
Treasury notes or bonds -: Debt obligations of the federal government with original
maturities of one year or more.
Municipal bonds -: Tax-exempt bonds issued by state and local governments.
Corporate bonds -: Long-term debt issued by private corporations typically paying
semimanual coupons and returning the face value of the bond at maturity.
and term definition
Investment -: Commitment of current resources in the expectation of deriving greater
resources in the future. [Sacrificing something of value now, expecting to benefit from
the sacrifice later]
Real assets -: Assets (like land, buildings, equipment and knowledge) used to produce
goods and services.
Financial Assets -: Claims on real assets or the income generated by them. The
successes or failure of the financial assets we choose to purchase ultimately depend on
the performance of the underlying real assets.
Fixed-income (debt) securities -: Pay a specified cash flow over a specific period.
Equity -: An ownership share in a corporation.
Derivative securities -: Securities providing payoffs that depend on the values of other
assets.
Agency problems -: Conflicts of interest between managers and stockholders.
Asset allocation -: Allocation of an investment portfolio across broad asset classes.
Security selection -: Choice of specific securities within each asset class.
Security analysis -: Analysis of the value of securities.
Risk-return trade-off -: Assets with higher expected returns entail greater risk.
Passive management -: Buying and holding a diversified portfolio without attempting to
identify mispriced securities.
Active management -: Attempting to identifying mispriced securities or to forecast
broad market trends.
Financial intermediaries -: institutions that "connect" borrowers and lenders by
accepting funds from lenders and loaning funds to borrowers.
Investment companies -: firms managing funds for investors. An investment company
may manage several mutual funds.
, Investment bankers -: Firms specializing in the sale of new securities to the public,
typically by underwriting the issue.
Primary market -: A market in which new issues of securities are offered to the public.
Secondary market -: Previously issued securities are trade among investors.
Venture capital (VC) -: Money invested to finance a new firm.
Private equity -: Investments in companies that are not trade on a stock exchange.
Money markets -: Include short-term, highly liquid, and relatively low-risk debt
instruments.
Treasury bills -: Short-term government securities issued at a discount from face value
and returning the face amount at maturity.
Certificate of deposit -: A bank time deposit.
Commercial paper -: Short-term unsecured debt issued by large corporations.
Bankers' acceptance -: An order to a bank by a customer to pay a sum of money at a
future date. (like a postdated check)
Eurodollars -: Dollar-denominated deposits at foreign banks or foreign branches of
American banks.
Repurchase agreements -: Short-term sales of securities with an agreement to
repurchase the securities at a higher price. (usually on the next day)
Term Repo -: Essentially identical transaction except that term can be 30 days or more
Federal funds -: Funds in the accounts of commercial banks at the Federal Reserve
Bank.
LIBOR (London Interbank Offer Rate) -: Lending rate among banks in the London
market.
Treasury notes or bonds -: Debt obligations of the federal government with original
maturities of one year or more.
Municipal bonds -: Tax-exempt bonds issued by state and local governments.
Corporate bonds -: Long-term debt issued by private corporations typically paying
semimanual coupons and returning the face value of the bond at maturity.
