Non-Callable Bonds
Non-callable bonds are also known as non-redeemable. non-callable bonds can only be paid out at maturity. The issuer of a non-callable bond can’t call the bond prior to its date of maturity unless penalties are paid to security holders. It is different from a callable bond. (more…)
Fund of Funds (FOFs)
Fund of Funds is a type of pooled investment fund that invests in other funds. Its investment strategy is holding a portfolio filled with other funds instead of directly investing in stocks, bonds, and other securities. It is also known as multi-manager investment. They generally invest in other mutual funds or hedge funds. (more…)
Modern Portfolio Theory
Modern portfolio theory is an investment theory. It allows the investor to assemble an asset portfolio that will maximize the return for a particular level of risk. The theory assumes investors will prefer less risky portfolios. Modern portfolio theory (MPT) can also be used to construct a portfolio that will minimize ↓ risk for a given level of expected return. Due to the abundance of market data, market risk has attracted significant interest since the 1950s. (more…)
Commodity-Linked Securities
Investment instruments or securities that are linked to one or more commodity prices are known as commodity-linked securities. These commodity-linked securities provide income to the owner, generally in the form of pay-outs. Like, stocks and bonds, commodities are a class of assets but they are physical products that have uniform quality and are produced in large quantities, for example, cotton, gold, oil, gas, etc. (more…)
Perpetual Bonds
Perpetual bonds, also known as perps, are bonds that have no maturity date. Perpetual bondholders like any other bondholders are paid interest via coupon payments but the bond’s principal amount does not come with a set date for repayment. The coupon payments are made for perpetuity.
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Asset Management Company
An Asset Management company is a company that pools funds from its clients and invests them in stocks, real estate, bonds, etc. Asset Management companies manage many hedge funds, pension plans as well as high net worth individual portfolios. They are also called money managers or money management firms. (more…)
Bond Issuer
The bond market is also known as the debt market or credit market is a financial market where participants can issue new debt, known as the primary market, or buy and sell debt securities, known as a secondary market. This is usually in the form of bonds, but it may include notes, bills, and so on public and private expenditures. Because of its scale and liquidity, the government bond market is a key part of the bond market, and it is almost always used to compare other bonds to determine credit risk. The primary way of a bond to default is to not pay on time or to not pay in full. (more…)
Credit Ratings
A credit rating is a judgment given by a recognized rating agency, regarding the current financial status of a company and its ability to fulfill its financial obligations. It also represents the likelihood of the debtor default. Investors and other market participants consider these ratings while deciding whether or not to invest in them. Credit risk rating mainly shows how likely a borrower is to default on their obligations to repay a loan. (more…)
PUT OPTION
When an investor the right, but not the obligation, to buy or sell a stock at an agreed-upon price and date, it is known as a stock option. There are two types of options: the put option which is a bet that a stock will fall, or the call option which is a bet that the price of a stock will rise. Put Options Option contracts known as put options are used when a stock or bond owner has the right, but not the duty, to sell or sell short a specific quantity of the underlying assets at or below a predetermined price within a predetermined time period. The striking price is the predetermined price at which the buyer of this option will be able to sell the shares if the option is exercised. (more…)
Gilt-Edged Securities
Gilt-edged securities are high-grade bonds that are issued by some national governments and private organizations issue to generate revenue. As the name suggests, gilt-edged securities refer to high-quality items whose value remains more or less constant over time.
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