The primary and secondary market.
Primary securities market - a market in which the initial public offering of securities.
Initial placement is of two types - private and public.
Private accommodation. In this case, the package of securities sold a limited number of people (usually one or two institutional investors). The peculiarity of the private placement is the closed nature of the transaction. No requirement to disclose financial documentation is not presented.
Public offering or IPO (initial public offering). Public offering takes place through intermediaries. They can act as exchange and institutional brokers.
The most important feature of the primary market - is full disclosure to investors, allowing to make an informed choice of securities for investment funds. Disclosure is subject to everything that happens in the primary market: the preparation of the prospectus, registration and control of its public authorities completeness of position data, the publication of the prospectus and the outcome of subscriptions, etc. Inaccurate information given at the initial offering of the securities will affect the liquidity of the securities in the secondary market.
Secondary securities market - a market in which the trading of securities. In this market, no longer accumulate new funding for the issuer, but only reallocated resources of subsequent investors.
As a mechanism for resale, it allows investors to freely buy and sell securities. In the absence of a secondary market or a weak organization subsequent resale of securities would be impossible or difficult that would alienate investors from buying all or part of the securities. As a result, society is left to lose, since many people, especially the latest, undertakings would not receive the necessary financial support.
13. The pricing of equities
The price of equities - its price to sell that in a free market is not a constant value and is installed or on a stock exchange or on the OTC market. Purely theoretical: it (sale price of equities) is directly proportional to the dividend and inversely proportional to the level of interest (ie, income derived by depositors of the bank) - event is sold for the same amount of money, which in its placement in the bank will not lower income per dividend.
U - Course of action;
D – Dividend;
B - bank interest.
In practice, the stock price is formed mostly on a " demand - supply / exposure time offer - demand. " Share price constantly fluctuates around its normal size . During the growth of production, when income and with it rising dividends , the stock price rises. When a recession reduced dividends , stock prices sharply lower . Such fluctuations in market securities indicates the overall "health" of the economy. theory, the share price has an impact inflation ( though, as the fair value of any other financial instrument ).
A document by which the corporation makes payment of dividends is called the " coupon sheet ".
Introduction to Forward Contracts.
In finance, a forward contract or simply a forward is a non-standardized contract between two parties to buy or to sell an asset at a specified future time at a price agreed upon today.[1] This is in contrast to a spot contract, which is an agreement to buy or sell an asset today. The party agreeing to buy the underlying asset in the future assumes a long position, and the party agreeing to sell the asset in the future assumes a short position. The price agreed upon is called the delivery price, which is equal to the forward price at the time the contract is entered into.
The price of the underlying instrument, in whatever form, is paid before control of the instrument changes. This is one of the many forms of buy/sell orders where the time and date of trade is not the same as the value date where the securities themselves are exchanged.
The forward price of such a contract is commonly contrasted with the spot price, which is the price at which the asset changes hands on the spot date. The difference between the spot and the forward price is the forward premium or forward discount, generally considered in the form of a profit, or loss, by the purchasing party.
Forwards, like other derivative securities, can be used to hedge risk (typically currency or exchange rate risk), as a means of speculation, or to allow a party to take advantage of a quality of the underlying instrument which is time-sensitive.