Thursday, February 13, 2020
Definitions Essay Example | Topics and Well Written Essays - 500 words
Definitions - Essay Example Financial System - system that enables transfer of money between savers or investors/lenders and borrowers and may also pertain to the set of implemented procedures that track the financial activities of the company. Diversification - a risk management technique that mixes a wide variety of investments within a portfolio and strives to smooth out unsystematic risk events in a portfolio so that the positive performance of some investments will neutralize the negative performance of others. Repurchase Agreement - (repo for short) is a type of short-term loan much used in the money markets, whereby the seller of a security agrees to buy it back at a specified price and time; the seller pays an interest rate, called the repo rate, when buying back the securities. US Treasury Security - government debtà issued by theà United States Department of the Treasuryà through theà Bureau of the Public Debt; treasuryà securitiesà are theà debtà financing instruments of theà United States federal government, and they are often referred to simply asà ââ¬Å"Treasuries.â⬠OTC Markets - decentralized (Over-The-Counter) markets of securities not listed on an exchange where market participants trade over the telephone, facsimile or electronic network instead of a physical trading floor. Adverse Selection - also called anti-selection or negative selection refers to a market process in which ââ¬Å"badâ⬠results occur when buyers and sellers haveà asymmetric informationà (i.e. access to different information): the ââ¬Å"badâ⬠products or services are more likely to be selected. Moral Hazard - The risk that a party to a transaction has not entered intoà the contract in good faith, has provided misleading information about its assets, liabilities or credit capacity, or has an incentive to take unusual risks in a desperate attempt to earn a profit before the contract settles. Money - a medium that can be
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