IFMP Fundamentals of Capital Markets Certification (FCM), Pakistan key terms

The segment where a company issues new securities to investors and receives the proceeds itself, as in an IPO or a fresh debt sale. Contrasts with trading among investors afterwards.

The marketplace where already-issued securities change hands between investors. The issuer receives no new money; the exchange provides liquidity and price discovery for existing holders.

The first sale of shares by a private company to the public, listing them on an exchange. It raises fresh capital and creates a market price for the stock.

The process in which a financial institution commits to buy unsold securities from an issuer at an agreed price, absorbing the risk of a failed sale in return for a fee.

A formal disclosure document issued to prospective investors describing a security offering, the issuer's business, financial position, risks, and use of proceeds. Regulators require it before a public sale.

A price-discovery method for an offering in which investors submit bids across a price range and the underwriter sets the final price from the demand gathered.

Ownership interest in a company, represented by shares that carry residual claims on profits and assets plus voting rights. Equity holders rank after creditors if the firm is wound up.

The basic unit of company ownership, giving the holder voting rights and a claim on dividends declared, but no fixed return. Also called common stock.

A share class that pays a stated dividend ahead of ordinary shareholders and usually has priority on assets in liquidation, but typically carries limited or no voting rights.

A distribution of company profits to shareholders, usually in cash, declared by the board. The amount is not guaranteed and depends on earnings and policy.

The cut-off date on which a share starts trading without the right to the next declared dividend. Buyers on or after this date do not receive that payment.

The date fixed by a company for identifying which registered holders are entitled to a dividend or other corporate entitlement. Settlement timing determines who appears on the register.

The total market value of a listed company's shares, calculated as the current share price multiplied by the number of shares outstanding. Used to size and rank companies.

The portion of a company's shares available for public trading, excluding holdings locked up by promoters, governments, or strategic investors. It drives index weighting and liquidity.

A debt security in which the issuer borrows a fixed principal from investors and promises periodic interest plus repayment at maturity. Holders are creditors, ranking ahead of shareholders.

The stated annual interest rate a bond pays on its face value, expressed as a percentage. It determines the cash interest an investor receives each period.

The nominal amount printed on a security that the issuer repays at maturity and on which coupon interest is calculated. Also called par value.

The total annual return an investor earns by holding a bond to maturity, assuming all coupons are reinvested at that same rate. It links the bond's price, coupons, and redemption value.

A measure of a bond's price sensitivity to interest-rate changes, expressed in years. Higher duration means the price moves more when yields shift.

An independent agency's opinion on a borrower's ability and willingness to meet debt obligations, expressed on a letter scale. It influences the interest rate investors demand.

The chance that a borrower fails to pay interest or principal on time, or defaults entirely. Investors demand higher yields to compensate for greater credit risk.

A failure by a borrower to meet a contractual payment obligation on a debt security, such as a missed coupon or principal repayment. It can trigger restructuring or legal claims.

The risk that a security's value falls when market interest rates rise, hitting fixed-income prices hardest. Longer maturities and lower coupons generally mean greater exposure.

The segment for short-term debt instruments, generally maturing within one year, traded between banks, institutions, and the central bank. It manages liquidity rather than long-term funding.

The segment for long-term securities such as shares and bonds with maturities beyond one year, channelling savings into productive investment. It contrasts with the short-term money market.

A short-term government debt instrument sold at a discount to face value and redeemed at par, with no coupon. It is treated as a low-risk money market asset.

An unsecured short-term promissory note issued by large companies to raise working capital, usually sold at a discount. It is a money market instrument backed by the issuer's credit standing.

A regulated marketplace where listed securities are traded through an order-driven or quote-driven system, providing price discovery, liquidity, and surveillance of members.

The admission of a company's securities to trading on an exchange, subject to eligibility rules such as minimum size, free float, and disclosure. It brings visibility and tradability.

A licensed intermediary who executes buy and sell orders on behalf of clients for a commission, without necessarily taking the other side of the trade.

The gap between the highest price a buyer will pay (bid) and the lowest price a seller will accept (ask). A narrow spread signals a liquid, actively traded market.

The ease with which a security can be bought or sold quickly at a price close to its fair value. Deep markets with many participants are more liquid and carry lower trading costs.

A firm that continuously quotes both buy and sell prices for a security, standing ready to trade in order to provide liquidity and smooth price gaps.

The process of transferring securities to the buyer and cash to the seller after a trade, completing the transaction. Standard cycles are now typically one or two business days.

The post-trade step that confirms trade details, nets obligations between parties, and manages counterparty risk before settlement occurs, often through a central counterparty.

The risk that the other party to a trade or contract fails to honour its side, causing loss. Clearing houses and collateral arrangements are used to reduce it.

A financial contract whose value is derived from an underlying asset, rate, or index, such as a future, option, or swap. It is used for hedging or speculation.

A standardised, exchange-traded agreement to buy or sell an asset at a set price on a future date, with daily margin adjustments. Both parties are obligated to perform.

A contract giving the buyer the right, but not the obligation, to buy or sell an underlying asset at a stated price before or on expiry, in return for a premium.

Taking an offsetting position in a related instrument to reduce exposure to price, rate, or currency movements. It transfers risk rather than eliminating it entirely.

Cash or collateral a trader must deposit with a broker or clearing house to cover potential losses on leveraged or derivative positions, topped up as prices move.

Using borrowed funds or margin to control a position larger than the capital committed. It magnifies both gains and losses on the underlying exposure.

A pooled investment vehicle that gathers money from many investors and invests it in a diversified portfolio managed by a professional firm, issuing units to participants.

The value of a fund's assets minus its liabilities, divided by units outstanding to give a per-unit price. It is typically calculated at the close of each trading day.

A regulated arrangement pooling investor money into a professionally managed portfolio, such as a mutual fund or unit trust, with units redeemable or traded under set rules.

Spreading investments across assets, sectors, or regions so that any single loss has limited impact on the whole portfolio. It reduces specific risk but not broad market risk.

Risk that affects the whole market, such as interest-rate shifts, inflation, or political events, and cannot be removed by diversification. Also called market risk.

The degree to which a security's price fluctuates over time, often measured by the standard deviation of returns. Higher volatility signals greater uncertainty and wider price swings.

A standard measure tracking the performance of a defined basket of securities, used to gauge market direction and to judge how a portfolio or fund has performed relative to it.

A valuation measure equal to a company's share price divided by its earnings per share. It shows how much investors pay for each unit of current profit.

A company's net profit divided by the number of shares outstanding, showing profit attributable to each share. It is a common input to valuation and ratio analysis.

Annual dividend per share divided by the current share price, expressed as a percentage. It shows the income return an investor receives from holding the stock.

The timely publication of material information by issuers and intermediaries so investors can make informed decisions. Regulators enforce it to support fair and transparent markets.

Dealing in securities while in possession of confidential price-sensitive information not available to the public, or passing such information to others. It is prohibited by securities law.

A statutory body that licenses market participants, sets conduct and disclosure rules, and supervises exchanges and intermediaries to protect investors and market integrity.

A country's monetary authority, which sets policy interest rates, manages liquidity, and may supervise parts of the financial system. Its decisions strongly influence money market yields.