Finance
General knowledge
General knowledge
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Flashcards
Define: Asset classes
An asset class is a group of securities that have similar financial characteristics, behave similarly in the marketplace, and are subject to the same laws and regulations.
List type of asset classes
- Equities
- Fixed income
- Money market
Define: Equity
Also called stocks, equities represent shares of ownership in publicly held companies.
- Historically have outperformed other investments (keep in mind that past performance does not guarantee future results)
- Most volatile in the short term
- Returns and principal will fluctuate so that accumulations, when redeemed, may be worth more or less than original cost
Define: Fixed income
Fixed income, or bond investments, generally pay a set rate of interest over a given period, then return the investor’s principal.
- Set rate of interest
- More stability than stocks
- Value fluctuates due to current interest and inflation rates
Define: Money market
Money market investments are relatively safe, liquid short-term investments; examples include: government issued securities, CDs, banker’s acceptances, euros and commercial paper.
- Less volatile than stocks and bonds
- Lower potential for growth
- Short-term investment
List type of financial instruments
- Equities (i.e. stock)
- Dept (i.e. bonds and mortgages)
- Derivatives
List derivatives contract types
- Forwards
- Futures
- Options
- Binary options
- Warrants
- Swaps
Define: Derivatives
A derivative is a financial contract between two parties that specify conditions under which payments are to be made between the parties.
List derivative underlying assets
- commodities
- stocks
- bonds
- interest rates
- currencies
