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In economics and finance, arbitrage is the practice of taking advantage of a difference in prices in two or more markets; striking a combination of matching deals to capitalize on the difference, the profit being the difference between the market prices at which the unit is traded. When used by academics, an arbitrage is a transaction that involves no negative cash flow at any probabilistic or temporal state and a positive cash flow in at least one state; in simple terms, it is the possibility of a risk-free profit after transaction costs. For example, an arbitrage opportunity is present when there is the possibility to instantaneously buy something for a low price and sell it for a higher price.
A security is a tradable financial asset. The term commonly refers to any form of financial instrument, but its legal definition varies by jurisdiction. In some countries and languages people commonly use the term "security" to refer to any form of financial instrument, even though the underlying legal and regulatory regime may not have such a broad definition. In some jurisdictions the term specifically excludes financial instruments other than equities and fixed-income instruments. In some jurisdictions it includes some instruments that are close to equities and fixed income, e.g., equity warrants.
In finance, a bond is a type of security used in mutual funds and private investing. The most common forms include municipal and corporate bonds.
A government bond or sovereign bond is a debt obligation issued by a national government to support government spending. It generally includes a commitment to pay periodic interest, called coupon payments, and to repay the face value on the maturity date. For example, a bondholder invests $20,000 into a 10-year government bond with a 10% annual coupon; the government would pay the bondholder 10% of the $20,000 each year. At the maturity date the government would give back the original $20,000.
A bearer bond is a bond or debt security issued by a business entity such as a corporation or a government. As a bearer instrument, it differs from the more common types of investment securities in that it is unregistered—no records are kept of the owner, or the transactions involving ownership. Whoever physically holds the paper on which the bond is issued is the presumptive owner of the instrument. This is useful for investors who wish to retain anonymity.
Fixed income refers to any type of investment under which the borrower or issuer is obliged to make payments of a fixed amount on a fixed schedule. For example, the borrower may have to pay interest at a fixed rate once a year and repay the principal amount on maturity. Fixed-income securities — more commonly known as bonds — can be contrasted with equity securities – often referred to as stocks and shares – that create no obligation to pay dividends or any other form of income. Bonds carry a level of legal protections for investors that equity securities do not — in the event of a bankruptcy, bond holders would be repaid after liquidation of assets, whereas shareholders with stock often receive nothing in the event of bankruptcy.
Eurodollars are time deposits denominated in U.S. dollars at banks outside the United States, and thus are not under the jurisdiction of the Federal Reserve. Consequently, such deposits are subject to much less regulation than similar deposits within the U.S. The term was originally coined for U.S. dollars in European banks, but it expanded over the years to its present definition. A U.S. dollar-denominated deposit in Tokyo or Beijing would be likewise deemed a Eurodollar deposit. There is no connection with the euro currency or the eurozone. The offshore locations of Eurodollar make it exposed to potential country risk and economic risk.
Eurocurrency is currency held on deposit outside its home market, i.e., held in banks located outside of the country which issues the currency. For example, a deposit of US dollars held in a bank in London, would be considered eurocurrency, as the US dollar is deposited outside of its home market.
An interest rate future is a financial derivative with an interest-bearing instrument as the underlying asset. It is a particular type of interest rate derivative.
A corporate bond is a bond issued by a corporation in order to raise financing for a variety of reasons such as to ongoing operations, M&A, or to expand business. The term is usually applied to longer-term debt instruments, with maturity of at least one year. Corporate debt instruments with maturity shorter than one year are referred to as commercial paper.
The bond market is a financial market where participants can issue new debt, known as the primary market, or buy and sell debt securities, known as the secondary market. This is usually in the form of bonds, but it may include notes, bills, and so for public and private expenditures. The bond market has largely been dominated by the United States, which accounts for about 39% of the market. As of 2021, the size of the bond market is estimated to be at $119 trillion worldwide and $46 trillion for the US market, according to Securities Industry and Financial Markets Association (SIFMA).
The Merrill Lynch US High Yield Master II Index (H0A0) is a commonly used benchmark index for high-yield corporate bonds. It is administered by Merrill Lynch. The Master II is a measure of the broad high yield market, unlike the Merrill Lynch BB/B Index, which excludes lower-rated securities.
A Formosa bond is a bond issued in Taiwan but denominated in a currency other than the New Taiwan Dollar. They are issued by the Taiwan branches of publicly traded overseas financial institutions and to be traded must have a credit rating of BBB or higher.
An Uridashi bond is a secondary offering of bonds outside Japan. They can be denominated in Yen or issued in a foreign currency. These bonds are sold to Japanese household investors. An Uridashi bond is normally issued in high-yielding currencies such as New Zealand Dollars or Australian Dollars in order to give the investor a higher return than the historically low domestic interest rate in Japan.
The United States dollar was established as the world's foremost reserve currency by the Bretton Woods Agreement of 1944. It claimed this status from the British pound sterling after the devastation of two world wars and the massive spending of Great Britain's gold reserves. Despite all links to gold being severed in 1971, the dollar continues be the world's foremost reserve currency. Furthermore, the Bretton Woods Agreement also set up the global post-war monetary system by setting up rules, institutions and procedures for conducting international trade and accessing the global capital markets using the U.S. dollar.
Cbonds is a financial data vendor and news agency based in the UAE, Russia and Latvia. Its main business lines include the development and maintenance of financial information websites, holding global financial conferences and publishing (Cbonds Review magazine and annual handbooks.
Dim sum bonds are bonds issued outside of China but denominated in Chinese renminbi, rather than the local currency. They are named after dim sum, a popular style of cuisine in southern China.
Since the late-2000s, the People's Republic of China (PRC) has sought to internationalize its official currency, the Renminbi (RMB). RMB internationalization accelerated in 2009 when China established the dim sum bond market and expanded Cross-Border Trade RMB Settlement Pilot Project, which helps establish pools of offshore RMB liquidity. The RMB was the 8th-most-traded currency in the world in 2013 and the 7th-most-traded in early 2014. By the end of 2014, RMB ranked 5th as the most traded currency, according to SWIFT's report, at 2.2% of SWIFT payment behind JPY (2.7%), GBP (7.9%), EUR (28.3%) and USD (44.6%). In February 2015, RMB became the second most used currency for trade and services, and reached the ninth position in forex trading. The RMB Qualified Foreign Institutional Investor (RQFII) quotas were also extended to five other countries — the UK, Singapore, France, Korea, Germany, and Canada, each with the quotas of ¥80 billion except Canada and Singapore (¥50bn). Previously, only Hong Kong was allowed, with a ¥270 billion quota.
A Yankee Bond is a bond issued by a foreign entity, such as a bank or company, but is issued and traded in the United States and denominated in U.S. dollars. For instance, Company ABC is headquartered in France. If Company ABC issues bonds in the United States that are denominated in U.S. dollars, the bonds are Yankee bonds. Yankee bonds are normally issued in tranches, a large debt structure financing arrangement into a lot of portion, each portions have different level of risk, interest rates and maturities, and the value of investment grouping might be extremely high, as much as $1 billion. U.S. investors buy Yankee bonds to branch out into overseas markets. Yankee bonds are same with other bonds which will require the borrower to pay a certain interest rate and principal amount according to the terms of the indenture. Yankee Bonds are administered by the Securities Act of 1933. A non-American company will sell bonds in United States to raise capital from American investors. Therefore, the issuers from non-American company have to register Yankee Bonds with the Securities and Exchange Commission (SEC) before offering the bond for sale. Hence, U.S. investors can purchase the securities issued by the foreign entity without worrying about the price fluctuation created by changes in currency exchange rates. Yankee bond prices are mostly influenced by the variations of interest rates in U.S. and the financial condition of the issuer.
The national debt of Turkey is the entire stock of direct, fixed-term, contractual, financial obligations of the state of the Republic of Turkey that are outstanding on a particular date.
References
- ↑ p. 15 Eurobonds; Michael Bowe. ISBN 1-55623-179-2
- ↑ "World Federation of Exchanges Monthly Statistics, extracted from 'Number of Bonds Listed' report". Archived from the original on 17 August 2014.
- ↑ "History of the Autostrade Group". Archived from the original on 15 June 2009. Retrieved 17 June 2009.
- ↑ "$15M. Autostrade Loan, Consortium Headed By Warburgs". The Times . London. 19 June 1963.
- ↑ Ferguson, Niall, High Financier: the Lives and Times of Siegmund Warburg, 220 (2010)
- ↑ "Subterranean capitalist blues". The Economist . 26 October 2013.
- ↑ "Bearer Bond Definition".
- ↑ Corporate Bonds and Structured Financial Products, Moorad Choudhry, 213.
