Primary vs Secondary Capital Market

Primary vs Secondary Capital Market

Primary vs Secondary Capital Market

Introduction: Capital market refers to any part of the financial system that raises capital from bonds, shares, and other investments. New stocks and bonds are created and sold to investors in the primary capital market, while investors trade securities on the secondary capital market. (more…)
What is Liquidity Premium Theory

What is Liquidity Premium Theory

Liquidity Premium Theory Liquidity premium theory is a concept widely used in bonds. To put it simply, it signifies the existence of risk-reward in investment. Investors can earn higher returns by taking additional risks. You might have heard ‘the greater the risk, the greater the reward’. Investors take different types of risks and accordingly they stand chances to make incremental returns. (more…)
How to Prepare FRM Level 1 Exam

FRM Level 1 – How to Prepare for the Exam

FRM Level 1 - How to Prepare for the Exam

Understand the curriculum To understand concepts, use Schweser notes. They are really good and will help you in getting through the exam. If you have enough time you can use the GARP textbooks as it is vast and requires a lot of time to complete. Other options such as Wiley and Bionic Turtle are also available. (more…)
What are Forward Contracts

What are Forward Contracts – Full Details

What is Forward Contracts? A forward contract is an agreement to buy or sell an asset at a certain price on a certain date in the future. Since the forward contract implies that underlying assets would be delivered on the specified date in the future which is considered as a type of derivative. These contracts are mostly traded in the over-the-counter market and are easily customized. For Example- Ram takes the long position agreeing to purchase the underlying asset at a future date for a specified price while Rohan takes the short position in the market agreeing to sell the asset on the same date for that same price. (more…)
Dividend Tax Credit

What is Dividend Tax Credit?

What is a Dividend Tax Credit? The dividend tax credit is the amount that a Canadian resident applies against his or her tax liability on the grossed-up portion of dividends which will be received from Canadian corporations. The gross-up and the dividend tax credit are applicable to individuals but not the corporations. (more…)
Mutual Funds

What are Mutual Funds?

What are Mutual Funds? Even a small organism like ant eat some part of food, and then keep a part for future. Similarly, we must also use of what we earn but also save a part of it for future. But what if this saved part lose value over the time, like 100 rupees saved today will not remain 100 after Two years, it will lose its value due to inflation effect. So, first step always will be to save a part, but then another step after that we will have to keep that in place where it can give you good return value over the time. (more…)
What is Merger Arbitrage Strategy

What is Merger Arbitrage Strategy

What is Merger Arbitrage? 
  • Merger arbitrage, also known as risk arbitrage, is an event-driven strategy mainly undertaken by hedge funds that attempts to capture a spread (difference) between two stock prices-
    • The price at which a company (target) trades after a deal is announced
                                                                    AND
    • The price at which an acquiring company (acquirer) has announced it will pay for that target company upon a successful deal at a future date.
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What is a Manufactured dividend?

What is a Manufactured dividend?

What is Dividend and What is Manufactured Dividend? What is the Normal Stock dividend?
  • Equity shareholders provide risk-capital to the company for managing & enhancing business.
  • The company rewards its shareholders by distributing a portion of its net profits which is approved by majority shareholders & decided by the board of directors with regards to payout rates & frequencies during the year.
  • Such reward to equity shareholders is known as a normal dividend.
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How does Funding Maturity Gap affect Banks?  

How does Funding Maturity Gap affect Banks?

What is the Funding Maturity Gap?
  • A bank funding substantial long term assets like a fixed-rate mortgage or long term infrastructure loans by short-term liabilities like deposits or commercial papers is a classic case of maturity gap which is also known as maturity mismatch or asset-liability mismatch.
  • To put it in simple terms, a maturity mismatch (gap) occurs when the tenure of maturing loans (which are on the assets side of the balance sheet of a bank) does not match the tenure of the sources of funds on the liabilities side.
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Butterfly Options Trading Strategy

Butterfly Options Trading Strategy

What is Butterfly Options Trading Strategy? Butterfly Option is a neutral trading option with limited risk and limited profit potential. It is the combination of the various bull and bears spreads. It is used when the trader believes that stocks underlying price will change very little over its lifetime. The butterfly option can be traded either upside or downside. Components of Butterfly Option The butterfly options strategy is a three-staged model the body (the middle position shaped as inverted alphabet V)and 2 wings (the 2 opposite spread). (more…)