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Security: Financial Terms Related To Security
Security: Financial Terms Related To Security
Security: Financial Terms Related To Security
SECURITY
Asset backed security
Bearer security
• A security the owner of which is not registered on the books of the issuer. A bearer
security is payable to the holder.
• Is a term which has several meanings. It often refers to high grade instruments
which are very liquid and have very little time to maturity. Among these are treasury
bills, commercial paper, and bankers' acceptances. In a somewhat broader sense it
can include money market shares and short-term municipal paper.
Convertible security
• A security that can be converted into common stock at the option of the security
holder, including convertible bonds and convertible preferred stock.
Debt security
Derivative security
• A financial security that is neither debt nor equity but derives its value from an
underlying asset that is other another security; called derivative for short.
Exchangeable security
• Security that grants the security holder the right to exchange the security for the
common stock of a firm other than the issuer of the security.
savings bonds).
Government security
• A debt obligation of the U.S. government, backed by its full faith, credit and taxing
power, and regarded as having no risk of default. The government issues short-term
Treasury Bills, medium-term Treasury notes, and long-term Treasury bonds.
• An institution that purchases for resale various government securities and other
Host security
Hybrid security
• A form of debt or equity financing that possesses characteristics of both debt and
equity.
• Also called a pass-through, a security created when one or more mortgage holders
form a collection (pool) of mortgages sells shares or participation certificates in the
pool. The cash flow from the collateral pool is passed through to the security holder
as monthly payments of principal, interest, and prepayments. This is the
predominant type of MBS traded in the secondary market.
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Municipal security
Primitive security
• An instrument such as a stock or bond for which payments depend only on the
financial status of the issuer.
Security
• Any claim that trades in the marketplace. Stocks, bonds, negotiable CDs, bankers
• According to the Securities Exchange Act of 1934, a security is any note, stock,
treasury stock, bond, debenture, certificate of interest or participation in any profit-
sharing agreement or in any oil, gas, or other mineral royalty or lease, any collateral-
trust certificate, preorganization certificate or subscription, transferable share,
investment contract, voting-trust certificate, certificate of deposit, for a security, any
put, call, straddle, option, or privilege on any security, certificate of deposit, or group
or index of securities (including any interest therein or based on the value thereof),
or any put, call, straddle, option, or privilege entered into on a national securities
exchange relating to foreign currency, or in general, any instrument commonly
known as a security'; or any certificate of interest or participation in, temporary or
interim certificate for, receipt for, or warrant or right to subscribe to or purchase, any
of the foregoing; but shall not include currency or any note, draft, bill of exchange, or
banker's acceptance which has a maturity at the time of issuance of not exceeding
nine months, exclusive of days of grace, or any renewal thereof the maturity of which
is likewise limited.
A simpler definition is that a security is a piece of paper that can be assigned a value
and sold, or any investment made with the expectation of a profit.
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• Piece of paper that proves ownership of stocks, bonds and other investments.
Security agreement
• The agreement between the borrower and the lender that specifies the collateral
held against a secured loan.
Security analyst
• See Analyst.
• Synonymous with the term margin. A cash amount of funds that must be deposited
with the broker for each contract as a guarantee of fulfillment of the futures contract.
It is not considered as part payment or purchase. Related: margin
• Maintenance margin security market line (SML). A description of the risk return
relationship for individual securities, expressed in a form similar to the capital market
line.
• Abbreviated SML. The depiction of the capital asset pricing model (CAPM) as a
graph that reflects the required return for each level of nondiversifiable risk (beta).
• Line representing the relationship between expected return and market risk.
• A plane that shows the equilibrium between expected return and the beta
coefficient of more than one factor.
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Security selection
Social security
Underlying security
• Options: the security subject to being purchased or sold upon exercise of an option
contract. For example, IBM stock is the underlying security to IBM options.
Depository receipts: The class, series and number of the foreign shares represented
by the depository receipt.