SIAA Fundamentals of Securities key terms

The segment of the capital markets where new securities are issued and sold to investors for the first time, allowing issuers to raise fresh capital directly from buyers.

The marketplace where previously issued securities are bought and sold among investors, providing liquidity and price discovery without the issuing company receiving new funds.

The first sale of a company's shares to the public, transitioning it from private to public ownership and typically raising capital on a primary market.

The ease with which an asset can be bought or sold quickly at a fair price without significantly affecting its market value; cash is the most liquid asset.

A firm that continuously quotes both buy and sell prices for a security, providing liquidity and facilitating trading by standing ready to transact with other participants.

A type of equity security representing ownership in a company, typically carrying voting rights and a residual claim on assets and earnings after other obligations are met.

A class of equity that usually pays a fixed dividend and has priority over common stock for dividends and liquidation proceeds, but often lacks voting rights.

A distribution of a portion of a company's earnings to its shareholders, typically paid in cash or additional shares, as decided by the board of directors.

The total market value of a company's outstanding shares, calculated by multiplying the current share price by the number of shares outstanding.

A company's buyback of its own shares from the market, reducing the number of shares outstanding and often increasing earnings per share and shareholder value.

A fixed income security representing a loan from an investor to a borrower, such as a corporation or government, which pays interest and repays principal at maturity.

The annual interest rate stated on a bond, expressed as a percentage of its face value, which determines the periodic interest payments made to bondholders.

The total return anticipated on a bond if held until maturity, accounting for its current price, coupon payments, and the difference between purchase price and face value.

A measure of a bond's sensitivity to interest rate changes, expressed in years, reflecting the weighted average time until cash flows are received.

The risk that changes in prevailing interest rates will affect the value of a fixed income investment, typically causing bond prices to fall when rates rise.

The risk that a bond issuer will fail to make timely interest or principal payments, potentially leading to default and loss for the investor.

An assessment by an independent agency of a borrower's creditworthiness, indicating the likelihood of default on debt obligations, often expressed as a letter grade.

A financial contract whose value is derived from the performance of an underlying asset, index, or rate, used for hedging risk or speculative purposes.

A contract giving the buyer the right, but not the obligation, to buy or sell an underlying asset at a specified price on or before a certain date.

A standardized agreement to buy or sell an asset at a predetermined price on a future date, traded on exchanges and subject to daily settlement.

A private investment fund that uses diverse strategies, including leverage and derivatives, to seek high returns and is typically open only to accredited or institutional investors.

An investment outside traditional stocks, bonds, and cash, such as private equity, real estate, commodities, or hedge funds, often with higher risk and lower liquidity.

A pooled investment vehicle that collects money from many investors to invest in a diversified portfolio of securities, managed by professional fund managers.

The per-share value of a fund's assets minus its liabilities, calculated daily for mutual funds and used as the price for buying and redeeming shares.

A fund that holds a basket of securities and trades on an exchange like a stock, offering diversification and intraday liquidity with typically lower costs than mutual funds.

The difference between the highest price a buyer is willing to pay (bid) and the lowest price a seller is willing to accept (ask) for a security.

An order to buy or sell a security at a specified price or better, providing price control but not guaranteeing execution if the market does not reach that price.

An order to buy or sell a security immediately at the best available current price, prioritizing speed of execution over price certainty.

The process of reconciling and confirming the details of a trade between parties, ensuring that both sides agree on the terms before settlement occurs.

The final transfer of securities from the seller to the buyer and of cash from the buyer to the seller, completing a trade and transferring ownership.

An entity that interposes itself between trade counterparties, becoming the buyer to every seller and seller to every buyer, reducing counterparty risk through novation.

The illegal practice of trading on material, nonpublic information about a company to gain an unfair advantage, violating securities laws and market fairness.

Information about a company that is not available to the public and whose disclosure would likely affect an investor's decision to buy or sell its securities.

A legal obligation to act in the best interest of another party, requiring loyalty, care, and disclosure of conflicts, often owed by advisers to clients.

The requirement that an investment recommendation must be appropriate for a client based on their financial situation, objectives, risk tolerance, and needs.

An investor's ability and willingness to endure declines in the value of their investments in exchange for potentially higher returns.

A risk management strategy that mixes a variety of investments within a portfolio to reduce exposure to any single asset or risk.

The process of dividing an investment portfolio among different asset categories, such as stocks, bonds, and cash, to balance risk and return according to goals.

A formal legal document required for securities offerings, providing detailed information about the investment, including risks, fees, and the issuer's financial condition.