FINM 7 NOTES (01/23/2023)

yanna
Flow of cash in a primary market:

Financial markets – place where trading happens.

cash
Actors in trading:

• buyer – investors – also called surplus units. company primary

• seller – investors – also called deficit units. market

buy
Financial assets are classified into two:

• claims of ownership Flow of cash in a secondary market

• claims for future fixed payments

investor investor
Claims of Ownership:

• equities
• share on earnings (dividends) *no company involved
• share on net assets or shareholder’s equity

Claims for Future for Fixed Payments (for fixed

interests)

• debt securities
o bonds – can be secured or unsecured
o mortgage – real estate mortgage
(collateral)
▪ mortgager – borrowing
(originator)
▪ mortgagee – trade (this is the
bank)
Financial markets are classified in terms of:

• In terms of maturity of a financial asset

o short – term: money markets (time
deposits, commercial paper, T-bills,
repurchase agreements)
o long – term: capital market (stock,
bonds)
• In terms of the types of financial assets
o claims of ownership: equities market
(stock market)
o claims for future fixed payments: debt
market (bond market)
• New issue or outstanding issues
o new issue: primary market (IPO)
o outstanding: secondary market
(stock exchange)