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 equity and fixed income instruments. In some jurisdictions it includes some instruments that are close to equities and fixed income, e.g., equity warrants.
The Federal Old-Age and Survivors Insurance Trust Fund and Federal Disability Insurance Trust Fund are trust funds that provide for payment of Social Security benefits administered by the United States Social Security Administration.
A credit default swap (CDS) is a financial swap agreement that the seller of the CDS will compensate the buyer in the event of a debt default or other credit event. That is, the seller of the CDS insures the buyer against some reference asset defaulting. The buyer of the CDS makes a series of payments to the seller and, in exchange, may expect to receive a payoff if the asset defaults.
A money market fund is an open-end mutual fund that invests in short-term debt securities such as US Treasury bills and commercial paper. Money market funds are managed with the goal of maintaining a highly stable asset value through liquid investments, while paying income to investors in the form of dividends. Although they are not insured against loss, actual losses have been quite rare in practice.
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, mergers & acquisitions, or to expand business. It is a longer-term debt instrument indicating that a corporation has borrowed a certain amount of money and promises to repay it in the future under specific terms. Corporate debt instruments with maturity shorter than one year are referred to as commercial paper.
A collateralized debt obligation (CDO) is a type of structured asset-backed security (ABS). Originally developed as instruments for the corporate debt markets, after 2002 CDOs became vehicles for refinancing mortgage-backed securities (MBS). Like other private label securities backed by assets, a CDO can be thought of as a promise to pay investors in a prescribed sequence, based on the cash flow the CDO collects from the pool of bonds or other assets it owns. Distinctively, CDO credit risk is typically assessed based on a probability of default (PD) derived from ratings on those bonds or assets.
The Argentine debt restructuring is a process of debt restructuring by Argentina that began on January 14, 2005, and allowed it to resume payment on 76% of the US$82 billion in sovereign bonds that defaulted in 2001 at the depth of the worst economic crisis in the nation's history. A second debt restructuring in 2010 brought the percentage of bonds under some form of repayment to 93%, though ongoing disputes with holdouts remained. Bondholders who participated in the restructuring settled for repayments of around 30% of face value and deferred payment terms, as well as warrants that paid investors based on annual economic growth as part of the same offer, and began to be paid punctually; the value of their nearly worthless bonds also began to rise. The remaining 7% of bondholders were later repaid 25% less than they were demanding, after centre-right and US-aligned leader Mauricio Macri came to power in 2015.
Bridgewater Associates, LP is an American investment management firm founded by Ray Dalio in 1975. The firm serves institutional clients including pension funds, endowments, foundations, foreign governments, and central banks. As of 2022, Bridgewater has posted the second highest gains of any hedge fund since its inception in 1975. The firm began as an institutional investment advisory service, graduated to institutional investing, and pioneered the risk parity investment approach in 1996.
Oaktree Capital Management, Inc. is an American global asset management firm specializing in alternative investment strategies. As of March 31, 2024, the company managed $192 billion for its clientele.
A structured investment vehicle (SIV) is a non-bank financial institution established to earn a credit spread between the longer-term assets held in its portfolio and the shorter-term liabilities it issues. They are simple credit spread lenders, frequently "lending" by investing in securitizations, but also by investing in corporate bonds and funding by issuing commercial paper and medium term notes, which were usually rated AAA until the onset of the financial crisis. They did not expose themselves to either interest rate or currency risk and typically held asset to maturity. SIVs differ from asset-backed securities and collateralized debt obligations in that they are permanently capitalized and have an active management team.
Apollo Global Management, Inc. is an American asset management firm that primarily invests in alternative assets. As of 2022, the company had $548 billion of assets under management, including $392 billion invested in credit, including mezzanine capital, hedge funds, non-performing loans, and collateralized loan obligations, $99 billion invested in private equity, and $46.2 billion invested in real assets, which includes real estate and infrastructure. The company invests money on behalf of pension funds, financial endowments, and sovereign wealth funds, as well as other institutional and individual investors.
Credit rating agencies and the subprime crisis is the impact of credit rating agencies (CRAs) in the American subprime mortgage crisis of 2007–2008 that led to the financial crisis of 2007–2008.
Beginning in 2008, many nations of the world enacted fiscal stimulus plans in response to the Great Recession. These nations used different combinations of government spending and tax cuts to boost their sagging economies. Most of these plans were based on the Keynesian theory that deficit spending by governments can replace some of the demand lost during a recession and prevent the waste of economic resources idled by a lack of demand. The International Monetary Fund recommended that countries implement fiscal stimulus measures equal to 2% of their GDP to help offset the global contraction. In subsequent years, fiscal consolidation measures were implemented by some countries in an effort to reduce debt and deficit levels while at the same time stimulating economic recovery.
The European debt crisis, often also referred to as the eurozone crisis or the European sovereign debt crisis, was a multi-year debt crisis that took place in the European Union (EU) from 2009 until the mid to late 2010s. Several eurozone member states were unable to repay or refinance their government debt or to bail out over-indebted banks under their national supervision without the assistance of third parties like other eurozone countries, the European Central Bank (ECB), or the International Monetary Fund (IMF).
William Hunt "Bill" Gross is an American investor and retired fund manager, who co-founded Pacific Investment Management Co. PIMCO is a global fixed income investment company. Gross ran their $270 billion Total Return Fund (PTTRX), before leaving to join Janus Capital Group in September 2014. Gross retired from active fund management in 2019.
In the context of sovereign debt crisis, private sector involvement (PSI) refers, broadly speaking, to the forced contribution of private sector creditors to a financial crisis resolution process, and, specifically, to the private sector incurring outright reductions ("haircuts") on the value of its debt holdings.
The Puerto Rican government-debt crisis was a financial crisis affecting the government of Puerto Rico. The crisis began in 2014 when three major credit agencies downgraded several bond issues by Puerto Rico to "junk status" after the government was unable to demonstrate that it could pay its debt. The downgrading, in turn, prevented the government from selling more bonds in the open market. Unable to obtain the funding to cover its budget imbalance, the government began using its savings to pay its debt while warning that those savings would eventually be exhausted. To prevent such a scenario, the United States Congress enacted a law known as PROMESA, which appointed an oversight board with ultimate control over the Commonwealth's budget. As the PROMESA board began to exert that control, the Puerto Rican government sought to increase revenues and reduce its expenses by increasing taxes while curtailing public services and reducing government pensions. These measures provoked social distrust and unrest, further compounding the crisis. In August 2018, a debt investigation report of the Financial Oversight and management board for Puerto Rico reported the Commonwealth had $74 billion in bond debt and $49 billion in unfunded pension liabilities as of May 2017. Puerto Rico officially exited bankruptcy on March 15, 2022.
Ellington Management Group is a multi-billion dollar hedge fund operation. As of June 2019, the firm was reportedly managing $8.5 billion in structured products and other credit instruments.
The corporate debt bubble is the large increase in corporate bonds, excluding that of financial institutions, following the financial crisis of 2007–08. Global corporate debt rose from 84% of gross world product in 2009 to 92% in 2019, or about $72 trillion. In the world's eight largest economies—the United States, China, Japan, the United Kingdom, France, Spain, Italy, and Germany—total corporate debt was about $51 trillion in 2019, compared to $34 trillion in 2009. Excluding debt held by financial institutions—which trade debt as mortgages, student loans, and other instruments—the debt owed by non-financial companies in early March 2020 was $13 trillion worldwide, of which about $9.6 trillion was in the U.S.
Economic turmoil associated with the COVID-19 pandemic has had wide-ranging and severe impacts upon financial markets, including stock, bond, and commodity markets. Major events included a described Russia–Saudi Arabia oil price war, which after failing to reach an OPEC+ agreement resulted in a collapse of crude oil prices and a stock market crash in March 2020. The effects upon markets are part of the COVID-19 recession and are among the many economic impacts of the pandemic.
