FINA 3710 Chapter Notes - Chapter 1-10: Takers, Market Clearing, Nasdaq
Document Summary
Chapter one financial assets and financial markets. Financial markets are one of the 3 major components of the financial system, the other two are financial institutions and market infrastructure. Asset: any position that has value in an exchange, can be tangible or intangible. Issuer of the financial asset: the entity that agrees to make future cash payments. The claims of the investor may be either a fixed dollar amount or a varying or residual amount. If it is a fixed dollar amount, the financial asset is referred to as a debt instrument. If it is a varying/residual amount, the financial asset is referred to as an equity claim. Equity claims obligate the issuer of the financial asset to pay the holder an amount based on earnings, if any, after holders of debt instruments have been paid. (ex. common stock). Some financial assets fall into both categories; preferred stock and convertible bonds.
