Securities Markets (Definitions and Concepts)
Summary
TLDRThis script provides an in-depth discussion on securities, markets, and key concepts related to them. It explains the meaning of securities, such as stocks and bonds, highlighting the difference between ownership (stocks) and indebtedness (bonds). The script also defines a market as a mechanism where buyers and sellers interact, outlining different types of markets, including the money, capital, stock, bond, and derivatives markets. Additionally, it covers the characteristics of a good securities market, emphasizing transparency, liquidity, internal efficiency, and external efficiency, which ensure fair and effective market functioning.
Takeaways
- 📄 Securities are proofs of ownership or indebtedness in a company, with typical examples being stocks and bonds.
- 🏢 Stocks represent shares of ownership in a corporation, meaning when you buy shares, you become a part-owner of the company.
- 📊 Shares and stocks can be used interchangeably, but technically, shares refer to a specific company, while stocks can be used more broadly.
- 💸 Bonds are contracts of debt where the issuer borrows funds from the investor, creating a liability for the issuer.
- 🛒 A market is a mechanism that brings together buyers and sellers to facilitate the exchange of goods and services, and can exist physically or online.
- 📈 Types of markets include the money market, capital market, stock market, bond market, and derivatives market, each dealing with different forms of goods and financial instruments.
- 💵 The money market deals with short-term, highly liquid securities, while the capital market focuses on long-term securities like stocks and bonds.
- 📉 The bond market deals with long-term debt instruments such as treasury notes and municipal bonds, while the stock market focuses on equity securities.
- ⚖️ The derivatives market includes financial instruments like options and futures contracts, which derive their value from other assets.
- 💡 A good securities market is characterized by transparency, liquidity, internal efficiency (low transaction costs), and external efficiency (quick price adjustments to new information).
Q & A
What are securities, and what do they represent?
-Securities are proofs of one's ownership or indebtedness in a company or entity. They represent either ownership, as in the case of stocks, or a debt obligation, as in the case of bonds.
What is the difference between stocks and shares?
-While stocks and shares can be used interchangeably, stocks generally refer to ownership in any company, while shares refer to ownership in a specific company.
What is a bond, and how does it differ from stocks?
-A bond is a contract of debt where the issuer borrows funds from the investor. Unlike stocks, which represent ownership in a company, bonds indicate indebtedness and are financial liabilities for the issuer.
What is the definition of a market in the business context?
-In the business context, a market is a mechanism that brings together buyers and sellers to facilitate the exchange of goods and services. It does not necessarily require a physical location, as transactions can occur online.
What are the different types of securities markets?
-The different types of securities markets include the money market, capital market, stock market, bond market, and derivatives market, each dealing with specific types of securities.
What is the main difference between the money market and the capital market?
-The money market deals with short-term securities, typically with maturities of less than one year, while the capital market handles long-term securities like stocks and bonds with maturities exceeding one year.
What are equity securities, and how do they differ from debt securities?
-Equity securities, such as stocks, represent ownership shares in a company, whereas debt securities, like bonds, represent a financial liability or debt owed by the issuer to the investor.
What is a derivative, and how is its value determined?
-A derivative is a financial instrument whose value is derived from the performance of underlying assets like commodity prices, foreign exchange rates, or interest rates. Its value depends on the movement of these underlying assets.
What are the characteristics of a good securities market?
-A good securities market is characterized by being transparent, liquid, internally efficient (low transaction costs), and externally efficient (prices adjust quickly to new information).
What does it mean for a market to be externally efficient?
-A market is externally efficient when prices adjust quickly to new information, ensuring that the prevailing price reflects all available data regarding the security.
Outlines
📚 Introduction to Securities and Markets
The video introduces the concept of securities and markets, explaining key topics such as the meaning of securities, market definitions, types of markets, and the characteristics of a good securities market. It outlines the agenda, starting with the definition of securities, followed by the definition of a market, the types of markets, and characteristics of a good securities market. The section also introduces securities as proofs of ownership or indebtedness in a company, with examples such as stocks and bonds.
💼 Definition of Securities with Examples
Securities are described as proof of ownership or indebtedness in a company. This section provides examples of securities, such as stocks and bonds. Stocks represent ownership in a corporation, where purchasing shares makes one a shareholder. Bonds, on the other hand, are debt instruments where the issuer borrows funds from an investor. The difference between stocks and shares is clarified, with 'stocks' used for general reference to any company, while 'shares' refer to ownership in a specific company.
🏪 Understanding Markets in a Business Context
This paragraph defines 'market' in a business context as a mechanism where buyers and sellers come together to transact goods and services. It emphasizes that a physical location is not necessary for a market to exist, especially in the case of online transactions. The critical factor is the communication of relevant details between buyers and sellers, such as the goods being sold and their prices.
🛒 Types of Markets: Overview
Markets are classified based on the type of goods or services traded. Examples include foreign exchange markets for currencies and securities markets for financial assets like stocks and bonds. Securities markets are further divided into categories like money markets, capital markets, stocks markets, bond markets, and derivatives markets. Each type of market serves different functions, such as short-term loans in money markets and long-term investments in capital markets.
💵 Money Market and Capital Market Explained
This section dives deeper into money markets and capital markets. Money markets focus on highly liquid, short-term financial instruments like treasury bills, commercial paper, and bank certificates of deposit, typically with maturities of less than one year. In contrast, capital markets deal with longer-term securities like bonds, stocks, and mutual funds, designed to finance long-term investments such as factories, highways, schools, and homes.
📊 Stocks Market: Equity Securities
The stocks market deals with equity securities such as stocks and warrants. Stocks represent ownership shares in a company, while warrants grant the holder the right, but not the obligation, to buy or sell a specified number of shares at a predetermined price within a set timeframe. Although warrants offer flexibility, holders are not obligated to act, giving them the option to exercise the right depending on market conditions.
📈 Bond Market: Long-Term Debt Instruments
The bond market is where long-term debt instruments like treasury notes, municipal bonds, and mortgage bonds are traded. Bonds are viewed as financial liabilities for the issuer and financial assets for the investor. Debt securities represent the obligation of the issuer to repay the borrowed amount, distinguishing them from equity securities, which represent ownership without debt.
📉 Derivatives Market: Financial Instruments Derived from Assets
The derivatives market focuses on financial instruments whose value is derived from underlying assets such as commodities, currencies, or interest rates. Examples include options and futures contracts. These instruments are considered executory contracts, meaning they represent promises to act in the future based on changes in the value of the underlying assets, essentially allowing participants to speculate on future price movements.
🔍 Characteristics of a Good Securities Market
A good securities market is defined by four key characteristics: transparency, liquidity, internal efficiency, and external efficiency. Transparency ensures equal and fair access to timely and accurate information. Liquidity allows securities to be quickly traded at prices close to the last transaction. Internal efficiency refers to low transaction costs, while external efficiency means that prices adjust rapidly to new information.
Mindmap
Keywords
💡Securities
💡Market
💡Stocks
💡Bonds
💡Money Market
💡Capital Market
💡Liquidity
💡Internal Efficiency
💡External Efficiency
💡Derivatives Market
Highlights
The definition of securities is ownership or indebtedness in a company or entity, represented by proofs such as stocks and bonds.
Stocks are shares of ownership in a corporation, and stockholders are part owners of the company.
The difference between stocks and shares lies in context: 'shares' often refer to specific companies, while 'stocks' refer to any company.
Bonds are contracts of debt between two parties, the issuer (borrower) and the investor (lender).
A market is a mechanism that brings together buyers and sellers for the transfer of goods and services, and it doesn't need a physical location.
In a market, buyers and sellers must communicate relevant details of the transaction, including the goods being traded and their price.
Markets are classified by the types of goods or services they trade, such as foreign exchange markets for currencies or securities markets for stocks and bonds.
The money market is designed for highly liquid, short-term instruments like treasury bills and commercial paper, with maturities typically under one year.
The capital market deals with longer-term securities, such as stocks and bonds, and is used to finance long-term investments.
The stock market is for trading equity securities, like stocks and warrants, where investors hold ownership shares in companies.
The bond market focuses on long-term debt instruments, such as treasury notes, bonds, and municipal bonds, with the issuer holding financial liability.
The derivatives market deals with instruments like options and futures contracts, whose value is derived from underlying assets like commodity prices and interest rates.
A good securities market is transparent, with equal and timely access to accurate information for all participants.
A liquid market allows securities to be traded quickly, with prices close to previous transactions.
Efficient markets have low transaction costs and adjust quickly to new information, ensuring prices reflect all available data.
Transcripts
hello and good day
our topic for today is securities
markets
definitions and concepts
this topic covers the meaning of
securities the definition of market
the types of markets and the
characteristics of a good
securities market
before anything else i would like to
give you the topic
outline for today's discussion first
what is the meaning of securities
second what is a market
third types of markets
and fourth characteristics of a good
securities market
without further ado let's start what is
the meaning of securities
when we say securities these are proofs
of one's ownership or indebtedness in a
company or
an entity in other words
capacity being securities
say some company or islam
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in order for you to better understand
securities
let me give you examples
two typical examples of securities
are stocks and bonds
stocks stocks
are shares of ownership in a corporation
stocks i shares when we say share
a share is the ownership interest
or right of a shareholder in an entity
when you
buy shares of a company
you become a stockholder or shareholder
of that company and when you become
a stockholder or shareholder of that
company
you become part owner of that company
so it on stocks or shares
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shares actually stocks and shares
are terms that can be used
interchangeably
meaning to say the montgomery shares
but take note specifically
there is a difference between stocks and
shares
study the following a
owns shares of coca-cola
company and b owns
stocks dietosa first
angina i shares
a second anginamit i stocks
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specific company therefore
the medium shares when you are referring
to
a specific company
so second walang nilagaya
na a specific company there is no
specific company therefore
gaga meeting with stocks when you are
referring to
any company not a specific
company and that
is the difference between stocks and
shares but take note
although specifically meron silang
pinakaiba
they can be used interchangeably
next bonds
a bond is a construct of debt
whereby one party called the issuer
borrows fund from another party
called the investor
ang bond i is a contract
of debt meaning to say
there is at least two parties
investor issuer
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he is the borrower of the fund
si investor in a man
so here between the issuer
and the investor
issuer
kai issuer
as you can see since bond is a contract
of debt
this is a proof that
there is an indebtedness
in a company or an entity
merong liability or death
si issuer kai investor
so those are the typical examples
of securities again
securities or proofs of one's
ownership or indebtedness in
a company or an entity
let us now proceed to the second
question what
is a market the market
that we are going to define here is not
the market
in research but rather the market in
business context when we say market
it is a mechanism that brings together
buyers and sellers to aid in the
transfer of goods
and services
in other words when we say market
it is anywhere where the buyers
and sellers come together
and transact with each other
of course for the purpose of buying and
selling
goods and services
a market does not necessarily
need a physical location for example
the transaction is an online transaction
in an online transaction between the
buyer
and seller the buyer
and seller can transact online
without the need of physical location
what is important here is that the
buyers
and sellers can communicate the relevant
details
of the transaction
therefore in a market hindi important
and physical location an important day
the buyers and sellers can transact
with each other
in a market it is important that
the buyers and sellers can communicate
the relevant details of the transaction
relevant details of transaction
for example the goods
being transacted
of course
they must agree on certain
goods of course hindi enough
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being transacted
in their transactions
and at the same time
it a transfer nagoods nang
seller of course another important
detail is the price of the goods
of course since their purpose
is to buy and sell goods and services
and services
as you can see the apartment meeting of
mines
the apartment agreement and their
agreement
should be communicated with each other
next types of markets
markets are usually designated by the
type of goods or services
that it trades hence a foreign exchange
market
is where currencies are sold and bought
while a securities market is where all
forms of securities
are traded that means
cleaner classify a market depending
on type of goods or services
of course food
such as meat fish chicken
vegetables etc
tina wakshang food market because
a food market i food
safari exchange market currencies
at the securities market of course
securities
securities markets can further be
classified into
the following first money market
second capital market
third stocks market
fourth bond market and fifth
derivatives market
i will discuss each securities market
one by one
let's start with the money market
money market is the market for highly
liquid
short term fixed income instruments
such as treasury bills commercial paper
and bank certificates of deposits
capacity now being short-term usually
young term
less than one year
so capacitor being money market item
market
designed for the making of
short term loans
actually it is the institutions
with temporary surpluses of funds
that meet the needs of borrowers who
have
temporary fund shortages
meaning to say human institutions
businesses or entities
now my shortage of funds
next capital market capital market
is the market for longer term securities
such as bonds stocks and mutual
funds this times a capital market
your maturity nang securities
are more than one year unlike
some money markets instruments or
securities
maturity in less than one year
capital market is designed to finance
long-term investments by businesses
governments and households
this is another difference
between capital market and money market
the basamani market and finance
is young short-term
investments orion manga temporary
investments perez capital market
this is designed to finance long-term
investments trading of funds in the
capital markets
makes possible the construction of
factories
highways schools and homes
next stocks market
stocks market is the market for various
equity securities
such as stocks and warrants
capacity capacitor being equity
securities
these are securities that represent
ownership shares
basically par as an investor
on equity securities a financial asset
person issuer an equity securities
i equity non issuer
examples non-equity securities are
stocks and warrants canadian disclosure
stocks
capacity being warrants or warrant
a warrant is a security
which grants the holder the right
but not the obligation to buy or sell
a stated number of underlying shares of
stock at a specified price
during a specified period of time
just like stocks a warrant is also
a security it grants
the holder the right but not the
obligation
to buy or sell a stated number of
underlying shares of stocks
meaning the same when warrant is bought
by one person or by the holder
merong right young holder event
shares of stocks at a specified
price during a specified period
of time
within that specified period of time
pero hindisha obliges
shares of stock
as a result he will not be
forced to sell or buy
that shares of stock at
a specified price during a specified
period
of time he has the right
but he has no obligation
it still depends upon the holder
of the waran kung
shares of a stock at a specified price
during a specified period of time
next bond market bond market
is the market for long-term debt
instruments
such as treasury notes treasury bonds
municipal bonds mortgage bonds and
debentures
capacity having debt securities or debt
instruments this is a
financial asset of the investor
and a financial liability of
the issuer
financial liability that's right in our
wagner that
securities or that instruments
because anthony none on the point of the
issuer
said that securities or that instruments
issuer and my financial liability
unlike the equity securities that's
white
equity inaudible i equity
non-issuer
and that securities and a debt
or financial liability none issuer
in equity securities yang young
equity non issuer
next derivatives market
derivatives market is the market
for derivatives or instruments whose
value are derived
from other underlying assets
examples of derivatives are options
and futures contracts
take note futures contracts
not future contracts
capacity derivative this is simply
a financial instrument that derives
its value from the movement in commodity
pricing foreign exchange rate
and interest rate of an underlying asset
or financial instrument
therefore as a financial instrument
you value non-derivative
i depend on some movement of
the commodity price foreign exchange
rate
and interest rate of the underlying
asset
or financial instrument
actually a derivative is
an executory contract capacitor being
executory contract
it is not a transaction but
an exchange of promises
about future action
expressed in the simplest terms
parties to the derivative financial
instrument
are taking bets on what will happen
to the underlying financial instrument
in the future next
characteristics of a good securities
market
has been the insecurities market
immaganda of course
it has to possess characteristics in
order for it to become
a good securities market
the question is what are these
characteristics
the following are characteristics of
what is considered
a good securities market first
transparent second liquid
third internally efficient and fourth
externally efficient unai anatomy
transparent
one attribute of a good securities
market
is that there is equal and fair access
to
information that means
all participants in the securities
market should have fair and equal
access to information
of course it's not enough equal
and fair access to information
the participants must have timely
and accurate information
for example dapat alumni participants
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in the current transaction
next liquid another feature
of a good market is that the securities
can be traded quickly and at a price
close to the prices of the previous
transaction meaning the same
human securities the securities market
ai madeleine mabenta
[Music]
omabelisna
in the previous transaction
next internally efficient
a good market should entail low
transaction costs therefore
paramasathen the internally efficient
young securities market
young transaction costs
securities market
another example is cost of transferring
the security young costs
transfer and security from
the seller to buyer should be
also low
and last externally efficient
a good market is one where prices
adjust quickly to new
information such that the prevailing
price
reflects all available information
regarding the security
that means externally efficient and
securities
market
securities market i
flexible in other words
the prices of securities can
adjust quickly to new
information
again the characteristics of a good
securities market
are transparent liquid
internally efficient and externally
efficient and that ends
the discussion in securities markets
definitions and concepts
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