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Agenda

Stocks
Bonds
Debentures
Accounting Equation
Derivatives
Market

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Stock/Shares/Equity

A type of security that signifies ownership in a
corporation and represents a claim on part of
the corporation's assets and earnings.
Common Stock : usually entitles the owner to
vote at shareholders' meetings and to receive
dividends.
Preferred Stock: generally does not have
voting rights, but has a higher claim on assets
and earnings than the common shares.
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Bond

Bond is an instrument of indebtedness of
the bond issuer to the holders.
It is a debt security, under which the issuer
owes the holders a debt and, depending on
the terms of the bond, is obliged to pay
them interest (the coupon) and/or to repay
the principal at a later date, termed the.
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Debentures


A debenture is a debt security issued by a
corporation that is not secured by specific
assets, but rather by the general credit of
the corporation.
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Bonds Classification

Fixed-income securities are classified
according to the length of time before
maturity. These are the three main
categories:

1. Bills - maturing in less than one year.
2. Notes - maturing in one to 10 years.
3. Bonds - maturing in more than 10 years.

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Further Classification



Zero-Coupon Bond

Coupon Bond
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Zero-Coupon Bond

This is a type of bond that makes no
coupon payments but instead is issued at a
considerable discount to par value.
Example: Let's say a zero-coupon bond
with a $1,000 par value and 10 years to
maturity is trading at $600; you'd be
paying $600 today for a bond that will be
worth $1,000 in 10 years.
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Coupon Bond

A coupon payment on a bond is a periodic
interest payment that the bondholder
receives during the time between when the
bond is issued and when it matures.
Example: If a bond has a face value
of$1,000 and a coupon rate of 5%, then it
pays total coupons of $50 per year. For the
typical bond, this will consist of semi-
annual payments of $25 each.
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Accounting Equation




Asset = Equity + Liabilities
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Derivatives

Futures : a standardized contract between two
parties to buy or sell a specified asset of
standardized quantity and quality for a price
agreed upon today (the futures price) with
delivery and payment occurring at a specified
future date, the delivery date.
Options : a contract which gives the buyer (the
owner) the right, but not the obligation, to buy
or sell an underlying asset or instrument at a
specified strike price on or before a specified
date.
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Derivatives(cont.)


Swaps : a derivative in which two
counterparties exchange cash flows of
one party's financial instrument for
those of the other party's financial
instrument.
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Market

The market can be divided into two, that
for Exchange-traded derivatives and that
for Over-the-counter (OTC) derivatives.
The legal nature of these products is very
different as well as the way they are
traded, though many market participants
are active in both.