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The New York Stock Exchange (NYSE) is a stock exchange located at 11 Wall Street in lower Manhattan, New York City, USA. It is the world's largest stock exchange by market capitalization of its listed companies at US$11.92 trillion as of Aug 2010. Average daily trading value was approximately US$153 billion in 2008.
The NYSE is operated by NYSE Euronext, which was formed by the NYSE's 2007 merger with the fully electronic stock exchange Euronext. The NYSE trading floor is located at 11 Wall Street and is composed of four rooms used for the facilitation of trading. A fifth trading room, located at 30 Broad Street, was closed in February 2007. The main building, located at 18 Broad Street, between the corners of Wall Street and Exchange Place, was designated a National Historic Landmark in 1978, as was the 11 Wall Street building.
The NASDAQ Stock Market, also known as the NASDAQ, is an American stock exchange. "NASDAQ" originally stood for "National Association of Securities Dealers Automated Quotations Systems," but the exchange's official stance is that the acronym is obsolete. It is the largest electronic screen-based equity securities trading market in the United States and fourth largest by market capitalization in the world. With 2919 ticker symbols, it has more trading volume than any other electronic stock exchange in the world.
The capital stock (or just stock) of a business entity represents the original capital paid into or invested in the business by its founders. It serves as a security for the creditors of a business since it cannot be withdrawn to the detriment of the creditors. Stock is distinct from the property and the assets of a business which may fluctuate in quantity and value.
A commodity is a good for which there is demand, but which is supplied without qualitative differentiation across a market. Commodities are often substances that come out of the earth and maintain roughly a universal price. A commodity is fungible, that is, equivalent no matter who produces it. Examples are petroleum and copper. The price of copper is universal, and fluctuates daily based on global supply and demand. Stereo systems, on the other hand, have many aspects of product differentiation, such as the brand, the user interface, the perceived quality etc. And, the more valuable a stereo is perceived to be, the more it will cost.
In contrast, one of the characteristics of a commodity good is that its price is determined as a function of its market as a whole. Well-established physical commodities have actively traded spot and derivative markets. Generally, these are basic resources and agricultural products such as iron ore, crude oil, coal, salt, sugar, coffee beans, soybeans, aluminum, copper, rice, wheat, gold, silver, palladium, and platinum. Soft commodities are goods that are grown, while hard commodities are the ones that are extracted through mining.
There is another important class of energy commodities which includes electricity, gas, coal and oil. Electricity has the particular characteristic that it is either impossible or uneconomical to store, hence, electricity must be consumed as soon as it is produced.
In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest (the coupon) and/or to repay the principal at a later date, termed maturity. A bond is a formal contract to repay borrowed money with interest at fixed intervals.
Thus a bond is like a loan: the issuer is the borrower (debtor), the holder is the lender (creditor), and the coupon is the interest. Bonds provide the borrower with external funds to finance long-term investments, or, in the case of government bonds, to finance current expenditure. Certificates of deposit (CDs) or commercial paper are considered to be money market instruments and not bonds. Bonds must be repaid at fixed intervals over a period of time.
Bonds and stocks are both securities, but the major difference between the two is that (capital) stockholders have an equity stake in the company (i.e., they are owners), whereas bondholders have a creditor stake in the company (i.e., they are lenders). Another difference is that bonds usually have a defined term, or maturity, after which the bond is redeemed, whereas stocks may be outstanding indefinitely. An exception is a consol bond, which is a perpetuity (i.e., bond with no maturity).
Any form of money that is in public circulation. Currency includes both hard money (coins) and soft money (paper money). Typically currency refers to money that is legally designated as such by the governing body, but in some cultures currency can refer to any object that has a perceived value and can be exchanged for other objects.
In finance an option strategy is the purchase and/or sale of one or various option positions and possibly an underlying position.
Options strategies can favor movements in the underlying that are bullish, bearish or neutral. In the case of neutral strategies, they can be further classified into those that are bullish on volatility and those that are bearish on volatility. The option positions used can be long and/or short positions in calls and/or puts at various strikes.
A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors and invests typically in investment securities (stocks, bonds, short-term money market instruments, other mutual funds, other securities, and/or commodities such as precious metals). The mutual fund will have a fund manager that trades (buys and sells) the fund's investments in accordance with the fund's investment objective. In the U.S., a fund registered with the Securities and Exchange Commission (SEC) under both SEC and Internal Revenue Service (IRS) rules must distribute nearly all of its net income and net realized gains from the sale of securities (if any) to its investors at least annually. Most funds are overseen by a board of directors or trustees (if the U.S. fund is organized as a trust as they commonly are) which is charged with ensuring the fund is managed appropriately by its investment adviser and other service organizations and vendors, all in the best interests of the fund's investors.
Since 1940 in the U.S., with the passage of the Investment Company Act of 1940 (the '40 Act) and the Investment Advisers Act of 1940, there have been three basic types of registered investment companies: open-end funds (or mutual funds), unit investment trusts (UITs); and closed-end funds. Other types of funds that have gained in popularity are exchange traded funds (ETFs) and hedge funds, discussed below. Similar types of funds also operate in Canada, however, in the rest of the world, mutual fund is used as a generic term for various types of collective investment vehicles, such as unit trusts, open-ended investment companies (OEICs), unitized insurance funds, undertakings for collective investments in transferable securities (UCITS, pronounced "YOU-sits") and SICAVs (pronounced "SEE-cavs").
A hedge fund is a lightly regulated investment fund that is typically open to a limited range of investors who pay a performance fee to the fund's investment manager.
Every hedge fund has its own investment strategy that determines the type of investments it undertakes and these strategies are highly individual. As a class, hedge funds undertake a wider range of investment and trading activities than traditional long-only investment funds, and invest in a broader range of assets including long and short positions in shares, bonds and commodities. As the name implies, hedge funds often seek to hedge some of the risks inherent in their investments using a variety of methods, notably short selling and derivatives.
In most jurisdictions, hedge funds are open only to a limited range of professional or wealthy investors who meet criteria set by regulators, and are accordingly exempted from many of the regulations that govern ordinary investment funds. The net asset value of a hedge fund can run into many billions of dollars, and the gross assets of the fund will usually be higher still due to leverage. Hedge funds dominate certain specialty markets such as trading within derivatives with high-yield ratings and distressed debt.
In the United States, a 401(k) or 401k retirement savings plan allows a worker to save for retirement, and have the savings invested while deferring current income taxes on the saved money and earnings until withdrawal. This type of plan is also known as a "traditional" 401(k).
401(k) plans are mainly employer-sponsored: employees elect to have a portion of their wages paid directly into their individual 401(k) account, which is managed by the employer. Such payments are known as "contributions".
Since 2006, another type of 401(k) plan is available. Participants in 401(k) plans that have the proper amendments can allocate some or all of their contributions to a separately-designated Roth account, commonly known as a Roth 401(k). These "Roth" contributions will be collected and treated as after-tax dollars; that is, income tax is paid or withheld in the year contributed. Qualified distributions from a designated Roth 401(k) account, including all income, are tax-free. (A traditional 401(k) account is funded with pre-tax dollars and, in general, tax must be paid when the original contribution and earnings are withdrawn.)
As a benefit to the employee, the employer can optionally choose to "match" part or sometimes all of the employee's contribution by depositing additional amounts in the employee's 401(k) account or simply offering a profit-sharing contribution to the plan. All employer matching funds are deposited into the account on a pretax basis, even if the employee's contributions are all Roth contributions. Employer contributions may be subject to vesting rules set by the plan documents requiring the employee to reach a certain number of years of service before they are entitled to keep the matching funds.
In participant-directed plans (the most common option), the employee can select from a number of investment options, usually an assortment of mutual funds that emphasize stocks, bonds, money market investments, or some mix of the above. Many companies' 401(k) plans also offer the option to purchase the company's stock. The employee can generally re-allocate money among these investment choices at any time. In the less common trustee-directed 401(k) plans, the employer appoints trustees who decide how the plan's assets will be invested.
The title of this article "401(k)" references 26 U.S.C. § 401(k), a section of the Internal Revenue Code. The corresponding plan and section for non-profit organizations is 403(b) (26 U.S.C. § 403(b)). For government entities, the equivalent is a 457 plan, currently under 457(b) (26 U.S.C. § 457) although older plans were established under 457(g).
Eco investing (or Green investing) is the practice of investing in companies that support or provide environmentally friendly products and practices. These companies encourage (and often profit from) new technologies that support the transition from carbon dependence to more sustainable alternatives.
As industries’ environmental impacts become more apparent, green topics have not only taken center stage in pop culture, but the financial world as well. Steve Schueth, President of First Affirmative Financial Network in Colorado Springs, Colorado, said that in the 1990s many investors “began to look for those companies that were better than their competitors in terms of managing their environmental impact.” While some investors still focus their funds to avoid only “the most egregious polluters,” the emphasis for many investors has switched to changing “the way money is used,” and using “it in a positive, transformative way to get us from where we are now ultimately to a truly sustainable society.”
The Global Climate Prosperity Scoreboard - launched by Ethical Markets Media and The Climate Prosperity Alliance to monitor private investments in green companies – estimated that over $1.248 trillion has been invested in solar, wind, geothermal, ocean/hydro and other green sectors since 2007. This number represents investments from North America, China, India, and Brazil, as well at other developing countries.
An alternative investment is an investment product other than the traditional investments of stocks, bonds, cash or property. The term is a relatively loose one and includes tangible assets such as Art, Wine, Antiques, Coins or Stamps and some financial assets such as commodities, private equity, hedge funds, venture capital and financial derivatives.
Oil and Gas
Petroleum (L. petroleum, from Greek: petra (rock) + Latin: oleum (oil)) or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling. It is refined and separated, most easily by boiling point, into a large number of consumer products, from gasoline and kerosene to asphalt and chemical reagents used to make plastics and pharmaceuticals.
The term petroleum was first used in the treatise De Natura Fossilium, published in 1546 by the German mineralogist Georg Bauer, also known as Georgius Agricola
Natural Gas Natural gas is a gas consisting primarily of methane, typically with 0-20% higher hydrocarbons (primarily ethane). It is found associated with other fossil fuels, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.
Most natural gas is created by two mechanisms: biogenic and thermogenic. Biogenic gas is created by methanogenic organisms in marshes, bogs, landfills, and shallow sediments. Deeper in the earth, at greater temperature and pressure, thermogenic gas is created from buried organic material.
Before natural gas can be used as a fuel, it must undergo processing to remove almost all materials other than methane. The by-products of that processing include ethane, propane, butanes, pentanes, and higher molecular weight hydrocarbons, elemental sulfur, carbon dioxide, water vapor, and sometimes helium and nitrogen.
Natural gas is often informally referred to as simply gas, especially when compared to other energy sources such as oil or coal.
A real estate investment trust or REIT (pronounced /ˈriːt/ rhymes with street) is a tax designation for a corporate entity investing in real estate that reduces or eliminates corporate income taxes. In return, REITs are required to distribute 90% of their income, which may be taxable, into the hands of the investors. The REIT structure was designed to provide a similar structure for investment in real estate as mutual funds provide for investment in stocks.
Like other corporations, REITs can be publicly or privately held. Public REITs may be listed on public stock exchanges like shares of common stock in other firms.
REITs can be classified as equity, mortgage, or hybrid.
The key statistics to look at in a REIT are its net asset value (NAV), adjusted funds from operations (AFFO) and cash available for distribution (CAD). REITs face challenges from both a slowing U.S. economy and the global financial crisis, depressing share values by 40 to 70 percent in some cases.
Real estate is a legal term (in some jurisdictions, such as the United Kingdom, Canada, Australia, USA and The Bahamas) that encompasses land along with improvements to the land, such as buildings, fences, wells and other site improvements that are fixed in location—immovable.Real estate law is the body of regulations and legal codes which pertain to such matters under a particular jurisdiction and include things such as commercial and residential real property transactions. Real estate is often considered synonymous with real property (sometimes called realty), in contrast with personal property (sometimes called chattel or personalty under chattel law or personal property law).
However, in some situations the term "real estate" refers to the land and fixtures together, as distinguished from "real property", referring to ownership of land and appurtenances, including anything of a permanent nature such as structures, trees, minerals, and the interest, benefits, and inherent rights thereof. Real property is typically considered to be Immovable property. The terms real estate and real property are used primarily in common law, while civil law jurisdictions refer instead to immovable property.
A mortgage loan is a loan secured by real property through the use of a mortgage note which evidences the existence of the loan and the encumbrance of that realty through the granting of a mortgage which secures the loan. However, the word mortgage alone, in everyday usage, is most often used to mean mortgage loan.
A home buyer or builder can obtain financing (a loan) either to purchase or secure against the property from a financial institution, such as a bank, either directly or indirectly through intermediaries. Features of mortgage loans such as the size of the loan, maturity of the loan, interest rate, method of paying off the loan, and other characteristics can vary considerably.
In many jurisdictions, though not all (Bali, Indonesia being one exception), it is normal for home purchases to be funded by a mortgage loan. Few individuals have enough savings or liquid funds to enable them to purchase property outright. In countries where the demand for home ownership is highest, strong domestic markets have developed.
Deed A deed is a signed and, in some jurisdictions, usually sealed legal instrument in writing used to grant a right. Deeds have historically been part of the broader category of instruments under seal, requiring only the affixing of a common seal to render them valid. Today, however, deeds are instruments in solemn form which require the author's signature and, depending upon the jurisdiction, either notarization or a number of attesting witnesses. In some places (but usually not in the United States), deeds are also referred to as agreements under seal, contracts by deed, or specialties. A specialty is a contract under seal (bond, legal mortgage, debt secured by writing under seal) and formerly ranked in priority above a simple contract in the administration of a decedent's estate for paying off liabilities, especially since specialties have a 12 year limitation period, twice that of a simple contract. They are often used by lawyers when a very formal document is required.
In Finance Theory - The term annuity is used in finance theory to refer to any terminating stream of fixed payments over a specified period of time. This usage is most commonly seen in discussions of finance, usually in connection with the valuation of the stream of payments, taking into account time value of money concepts such as interest rate and future value.
Examples of annuities are regular deposits to a savings account, monthly home mortgage payments and monthly insurance payments. Annuities are classified by payment dates. The payments (deposits) may be made weekly, monthly, quarterly, yearly, or at any other interval of time.
In the U.S. an annuity contract is created when an insured party, usually an individual, gives a life insurance company money that will later be distributed back to the insured party over time. Annuity contracts traditionally provide a guaranteed distribution of income over time, until the death of the person or persons named in the contract or until a final date, whichever comes first. However, the majority of modern annuity customers use annuities only to accumulate funds free of income and capital gains taxes and to later take lump-sum withdrawals without using the guaranteed-income-for-life feature.
A carbon credit is a generic term for any tradable certificate or permit representing the right to emit one tonne of carbon dioxide or carbon dioxide equivalent (CO2-e).
Carbon credits and carbon markets are a component of national and international attempts to mitigate the growth in concentrations of greenhouse gases (GHGs). One carbon credit is equal to one ton of carbon dioxide, or in some markets, carbon dioxide equivalent gases. Carbon trading is an application of an emissions trading approach. Greenhouse gas emissions are capped and then markets are used to allocate the emissions among the group of regulated sources. The goal is to allow market mechanisms to drive industrial and commercial processes in the direction of low emissions or less carbon intensive approaches than those used when there is no cost to emitting carbon dioxide and other GHGs into the atmosphere. Since GHG mitigation projects generate credits, this approach can be used to finance carbon reduction schemes between trading partners and around the world.
There are also many companies that sell carbon credits to commercial and individual customers who are interested in lowering their carbon footprint on a voluntary basis. These carbon offsetters purchase the credits from an investment fund or a carbon development company that has aggregated the credits from individual projects. The quality of the credits is based in part on the validation process and sophistication of the fund or development company that acted as the sponsor to the carbon project. This is reflected in their price; voluntary units typically have less value than the units sold through the rigorously validated Clean Development Mechanism.
Tax deferral refers to instances where a taxpayer can delay paying taxes to some future period. In theory, the net taxes paid should be the same. Taxes can sometimes be deferred indefinitely, or may be taxed at a lower rate in the future, particularly for deferral of income taxes. It is a general fact of taxation that when taxpayers can choose when to pay taxes, the total amount paid in tax will likely be lower.
According to NYSE, a blue-chip stock is stock in a company with a national reputation for quality, reliability and the ability to operate profitably in good times and bad. The most popular index which follows US blue chips is the Dow Jones Industrial Average. The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally the leaders in their industry. It has been a widely followed indicator of the stock market since October 1, 1928.
The foreign exchange market (forex, FX, or currency market) is a worldwide decentralized over-the-counter financial market for the trading of currencies. Financial centers around the world function as anchors of trading between a wide range of different types of buyers and sellers around the clock, with the exception of weekends. The foreign exchange market determines the relative values of different currencies.
The primary purpose of the foreign exchange is to assist international trade and investment, by allowing businesses to convert one currency to another currency. For example, it permits a US business to import British goods and pay Pound Sterling, even though the business's income is in US dollars. It also supports speculation, and facilitates the carry trade, in which investors borrow low-yielding currencies and lend (invest in) high-yielding currencies, and which (it has been claimed) may lead to loss of competitiveness in some countries.
In a typical foreign exchange transaction, a party purchases a quantity of one currency by paying a quantity of another currency. The modern foreign exchange market began forming during the 1970s when countries gradually switched to floating exchange rates from the previous exchange rate regime, which remained fixed as per the Bretton Woods system.
The foreign exchange market is unique because of
* its huge trading volume, leading to high liquidity;
* its geographical dispersion;
* its continuous operation: 24 hours a day except weekends, i.e. trading from 20:15 GMT on Sunday until 22:00 GMT Friday;
* the variety of factors that affect exchange rates;
* the low margins of relative profit compared with other markets of fixed income; and
* the use of leverage to enhance profit margins with respect to account size.
As such, it has been referred to as the market closest to the ideal of perfect competition, notwithstanding currency intervention by central banks. According to the Bank for International Settlements, as of April 2010, average daily turnover in global foreign exchange markets is estimated at $3.98 trillion, a growth of approximately 20% over the $3.21 trillion daily volume as of April 2007.
The $3.98 trillion break-down is as follows:
* $1.490 trillion in spot transactions
* $475 billion in outright forwards
* $1.765 trillion in foreign exchange swaps
* $43 billion currency swaps
* $207 billion in options and other products
Interest is a fee paid on borrowed assets. It is the price paid for the use of borrowed money, or, money earned by deposited funds. Assets that are sometimes lent with interest include money, shares, consumer goods through hire purchase, major assets such as aircraft, and even entire factories in finance lease arrangements. The interest is calculated upon the value of the assets in the same manner as upon money.
Interest can be thought of as "rent of money". defined as the compensation paid by the borrower of money to the lender of money. When money is deposited in a bank, interest is typically paid to the depositor as a percentage of the amount deposited; when money is borrowed, interest is typically paid to the lender as a percentage of the amount owed. The percentage of the principal that is paid as a fee over a certain period of time (typically one month or year), is called the interest rate.
Interest is compensation to the lender, for a) risk of principal loss, called credit risk; and b) forgoing other useful investments that could have been made with the loaned asset. These forgone investments are known as the opportunity cost. Instead of the lender using the assets directly, they are advanced to the borrower. The borrower then enjoys the benefit of using the assets ahead of the effort required to obtain them, while the lender enjoys the benefit of the fee paid by the borrower for the privilege. In economics, interest is considered the price of credit.
In financial accounting, assets are economic resources. Anything tangible or intangible that is capable of being owned or controlled to produce value and that is held to have positive economic value is considered an asset. Simply stated, assets represent ownership of value that can be converted into cash (although cash itself is also considered an asset).
The balance sheet of a firm records the monetary value of the assets owned by the firm. It is money and other valuables belonging to an individual or business. Two major asset classes are tangible assets and intangible assets. Tangible assets contain various subclasses, including current assets and fixed assets. Current assets include inventory, while fixed assets include such items as buildings and equipment.
Intangible assets are nonphysical resources and rights that have a value to the firm because they give the firm some kind of advantage in the market place. Examples of intangible assets are goodwill, copyrights, trademarks, patents and computer programs, and financial assets, including such items as accounts receivable, bonds and stocks.
Dividends are payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders. When a corporation earns a profit or surplus, that money can be put to two uses: it can either be re-invested in the business (called retained earnings), or it can be paid to the shareholders as a dividend. Many corporations retain a portion of their earnings and pay the remainder as a dividend.
For a joint stock company, a dividend is allocated as a fixed amount per share. Therefore, a shareholder receives a dividend in proportion to their shareholding. For the joint stock company, paying dividends is not an expense; rather, it is the division of after tax profits among shareholders. Retained earnings (profits that have not been distributed as dividends) are shown in the shareholder equity section in the company´s balance sheet - the same as its issued share capital. Public companies usually pay dividends on a fixed schedule, but may declare a dividend at any time, sometimes called a special dividend to distinguish it from a regular one.
Cooperatives, on the other hand, allocate dividends according to members' activity, so their dividends are often considered to be a pre-tax expense.
Dividends are usually settled on a cash basis, store credits (common among retail consumers' cooperatives) and shares in the company (either newly created shares or existing shares bought in the market.) Further, many public companies offer dividend reinvestment plans, which automatically use the cash dividend to purchase additional shares for the shareholder.
The word "dividend" comes from the Latin word "dividendum" meaning " the thing which is to be divided among all."
A capital gain is a profit that results from investments into a capital asset, such as stocks, bonds or real estate, which exceeds the purchase price. It is the difference between a higher selling price and a lower purchase price, resulting in a financial gain for the investor. Conversely, a capital loss arises if the proceeds from the sale of a capital asset are less than the purchase price.
Capital gains may refer to "investment income" that arises in relation to real assets, such as property; financial assets, such as shares/stocks or bonds; and intangible assets such as goodwill.
Many countries impose a tax on capital gains of individuals or corporations, although relief may be available to exempt capital gains: in relation to holdings in certain assets such as significant common stock holdings, to provide incentives for entrepreneurship, or to compensate for the effects of inflation.
In finance, speculation is a financial action that does not promise safety of the initial investment along with the return on the principal sum. Speculation typically involves the lending of money or the purchase of assets, equity or debt, but in a manner that has not been given thorough analysis or is deemed to have low margin of safety or a significant risk of the loss of the principal investment. The term, "speculation," which is formally defined as above in Graham and Dodd's 1934 text, Security Analysis, contrasts with the term "investment," which is a financial operation that, upon thorough analysis, promises safety of principal and a satisfactory return.
In a financial context, the terms "speculation" and "investment" are actually quite specific. For instance, although the word "investment" is typically used, in a general sense, to mean any act of placing money in a financial vehicle with the intent of producing returns over a period of time, most ventured money—including funds placed in the world's stock markets—is actually not investment, but speculation.
Speculators may rely on an asset appreciating in price due to any of a number of factors that cannot be well enough understood by the speculator to make an investment-quality decision. Some such factors are shifting consumer tastes, fluctuating economic conditions, buyers' changing perceptions of the worth of a stock security, economic factors associated with market timing, the factors associated with solely chart-based analysis, and the many influences over the short-term movement of securities.
There are also some financial vehicles that are, by definition, speculation. For instance, trading commodity futures contracts, such as for oil and gold, is, by definition, speculation. Short selling is also, by definition, speculative.
Financial speculation can involve the buying, holding, selling, and short-selling of stocks, bonds, commodities, currencies, collectibles, real estate, derivatives, or any valuable financial instrument to profit from fluctuations in its price, irrespective of its underlying value.
In architecture speculation is used to determine works that show a strong conceptual and strategic focus.
In finance, a futures contract is a standardized contract between two parties to buy or sell a specified asset (eg.oranges, oil, gold) of standardized quantity and quality at a specified future date at a price agreed today (the futures price). The contracts are traded on a futures exchange. Futures contracts are not "direct" securities like stocks, bonds, rights or warrants. They are still securities, however, though they are a type of derivative contract. The party agreeing to buy the underlying asset in the future assumes a long position, and the party agreeing to sell the asset in the future assumes a short position.
The price is determined by the instantaneous equilibrium between the forces of supply and demand among competing buy and sell orders on the exchange at the time of the purchase or sale of the contract.
In many cases, the underlying asset to a futures contract may not be traditional "commodities" at all – that is, for financial futures, the underlying asset or item can be currencies, securities or financial instruments and intangible assets or referenced items such as stock indexes and interest rates.
The future date is called the delivery date or final settlement date. The official price of the futures contract at the end of a day's trading session on the exchange is called the settlement price for that day of business on the exchange.
A closely related contract is a forward contract; they differ in certain respects. Future contracts are very similar to forward contracts, except they are exchange-traded and defined on standardized assets. Unlike forwards, futures typically have interim partial settlements or "true-ups" in margin requirements. For typical forwards, the net gain or loss accrued over the life of the contract is realized on the delivery date.
A futures contract gives the holder the obligation to make or take delivery under the terms of the contract, whereas an option grants the buyer the right, but not the obligation, to establish a position previously held by the seller of the option. In other words, the owner of an options contract may exercise the contract, but both parties of a "futures contract" must fulfill the contract on the settlement date. The seller delivers the underlying asset to the buyer, or, if it is a cash-settled futures contract, then cash is transferred from the futures trader who sustained a loss to the one who made a profit. To exit the commitment prior to the settlement date, the holder of a futures position has to offset his/her position by either selling a long position or buying back (covering) a short position, effectively closing out the futures position and its contract obligations.
Futures contracts, or simply futures, (but not future or future contract) are exchange-traded derivatives. The exchange's clearing house acts as counterparty on all contracts, sets margin requirements, and crucially also provides a mechanism for settlement.
In finance, diversification means reducing risk by investing in a variety of assets. If the asset values do not move up and down in perfect synchrony, a diversified portfolio will have less risk than the weighted average risk of its constituent assets, and often less risk than the least risky of its constituents. Therefore, any risk-averse investor will diversify to at least some extent, with more risk-averse investors diversifying more completely than less risk-averse investors.
Diversification is one of two general techniques for reducing investment risk. The other is hedging. Diversification relies on the lack of a tight positive relationship among the assets' returns, and works even when correlations are near zero or somewhat positive. Hedging relies on negative correlation among assets, or shorting assets with positive correlation.
It is important to remember that diversification only works because investment in each individual asset is reduced. If someone starts with $10,000 in one stock and then puts $10,000 in another stock, they would have more risk, not less. Diversification would require the sale of $5,000 of the first stock to be put into the second. There would then be less risk. Hedging, by contrast, reduces risk without selling any of the original position.
The risk reduction from diversification does not mean anyone else has to take more risk. If person A owns $10,000 of one stock and person B owns $10,000 of another, both A and B will reduce their risk if they exchange $5,000 of the two stocks, so each now has a more diversified portfolio
In finance and economics, divestment or divestiture is the reduction of some kind of asset for either financial or ethical objectives or sale of an existing business by a firm. A divestment is the opposite of an investment.
Of all the precious metals, gold is the most popular as an investment. Investors generally buy gold as a hedge or safe haven against any economic, political, social, or fiat currency crises (including investment market declines, burgeoning national debt, currency failure, inflation, war and social unrest). The gold market is also subject to speculation as other commodities are, especially through the use of futures contracts and derivatives. The history of the gold standard, the role of gold reserves in central banking, gold's low correlation with other commodity prices, and its pricing in relation to fiat currencies during the financial crisis of 2007–2010, suggest that gold has features of being money.
A tangible investment is something that you can pick up and hold. This contrasts with financial investments such as stocks, bonds, and real estate.
Tangible investments are sometimes used as a tool to reduce overall investment risk through diversification.
Intangible assets are defined as identifiable non-monetary assets that cannot be seen, touched or physically measured, which are created through time and/or effort and that are identifiable as a separate asset. There are two primary forms of intangibles - legal intangibles (such as trade secrets (e.g., customer lists), copyrights, patents, and trademarks) and competitive intangibles (such as knowledge activities (know-how, knowledge), collaboration activities, leverage activities, and structural activities). Legal intangibles are known under the generic term intellectual property and generate legal property rights defensible in a court of law. Competitive intangibles, whilst legally non-ownable, directly impact effectiveness, productivity, wastage, and opportunity costs within an organization - and therefore costs, revenues, customer service, satisfaction, market value, and share price. Human capital is the primary source of competitive intangibles for organizations today. Competitive intangibles are the source from which competitive advantage flows, or is destroyed. The area of finance that deals with intangible assets is known as Intangible Asset Finance.
The Uniform Commercial Code (Section 9-102(a)(42)) defines "general intangibles" as
"any personal property...other than accounts, chattel paper, commercial tort claims, deposit accounts, documents, goods, instruments, investment property, letter of credit rights, letters of credit, money, and oil, gas, or other minerals before extraction. The term includes payment intangibles and software."
A megaproject (sometimes also called "major program") is an extremely large-scale investment project. Megaprojects are typically defined as costing more than US$1 billion and attracting a lot of public attention because of substantial impacts on communities, environment, and budgets. Megaprojects can also be defined as "initiatives that are physical, very expensive, and public". Care in the project development process may be needed to reduce any possible optimism bias and strategic misrepresentation.
Megaprojects include bridges, tunnels, highways, railways, airports, seaports, power plants, dams, wastewater projects, Special Economic Zones, oil and natural gas extraction projects, public buildings, information technology systems, aerospace projects, and weapons systems; however, the most common megaprojects are in the categories of hydroelectric facilities, nuclear power plants and large public transportation projects
A market trend is a putative tendency of a financial market to move in a particular direction over time. These trends are classified as secular for long time frames, primary for medium time frames, and secondary lasting short times. Traders identify market trends using technical analysis, a framework which characterizes market trends as a predictable price response of the market at levels of price support and price resistance, varying over time.
The terms bull market and bear market describe upward and downward market trends, respectively, and can be used to describe either the market as a whole or specific sectors and securities.
Short-Term Investment Fund (STIF)
A Short-Term Investment Fund (STIF) is a type of investment fund which invests in money market investments of high quality and low risk. They are commonly used by investors to temporarily store funds while arranging for their transfer to another investment vehicle that will provide higher returns. <http://en.wikipedia.org/wiki/Short-Term_Investment_Fund#cite_note-0>
This type of fund aims to protect capital while generating a return that compares favourably with a particular benchmark, such as a Treasury Bill index. These types of fund have low management fees (usually well beneath 1% p.a.) and relatively low rates of return, commensurate with their low-risk investment style.
In economics and finance, an index is a statistical measure of changes in a representative group of individual data points. These data may be derived from any number of sources, including company performance, prices, productivity, and employment. Economic indices (index, plural) track economic health from different perspectives. Influential global financial indices such as the Global Dow, and the NASDAQ Composite track the performance of selected large and powerful companies in order to evaluate and predict economic trends. The Dow Jones Industrial Average and the S&P 500 primarily track U.S. markets, though some legacy international companies are included. The Consumer Price Index tracks the variation in prices for different consumer goods and services over time in a constant geographical location, and is integral to calculations used to adjust salaries, bond interest rates, and tax thresholds for inflation. The GDP Deflator Index, or real GDP, measures the level of prices of all new, domestically produced, final goods and services in an economy. Market performance indices include the labour market index/job index and proprietary stock market index investment instruments offered by brokerage houses.
Some indices display market variations that cannot be captured in other ways. For example, the Economist provides a Big Mac Index that expresses the adjusted cost of a globally ubiquitous Big Mac as a percentage over or under the cost of a Big Mac in the U.S. with a U.S. dollar (estimated: $3.57). Norway prices reflect most relatively expensive Big Mac, at an 84% increase over U.S. prices, or $6.5725 U.S. The least relatively expensive Big Mac price occurs in Hong Kong, at a 52% reduction from U.S. prices, or $1.71 U.S. The Big Mac index is used to predict currency values. From this example, it would be assumed that Hong Kong currency is undervalued, and provides a currency investment opportunity.
A capitalization-weighted index is an index whose components are weighted according to the total market value of their outstanding shares. Also called a market-value-weighted index. The impact of a component's price change is proportional to the issue's overall market value, which is the share price times the number of shares outstanding.
For example, the AMEX Composite Index (XAX) has more than 800 component stocks. The weighting of each stock constantly shifts with changes in the stock's price and the number of shares outstanding. The index fluctuates in line with the price move of the stocks.
Some capitalization-weighted indices
* NASDAQ Composite Index
* NASDAQ-100 Index
* NYSE Composite Index
* Hang Seng Index in Hong Kong
* Russell 2000 Index
* S&P 500 - Now float-weighted
* Standard & Poor's 100 Index (OEX) - now float weighted
* IBEX 35 Index - index comprising the 35 most liquid Spanish stocks traded in the continuous market, and is Bolsa de Madrid's benchmark.
* Indice de Precios y Cotizaciones (IPC) - index of 35 of the Bolsa Mexicana de Valores (BMV) most highly marketable issuers with a minimum market value of $100 million; revised every six months.
* Kuala Lumpur Composite Index (KLCI)
* FTSE TechMark
* CAC 40 Index
* Taiwan Capitalization Weighted Stock Index
The S&P 500 is a free-float capitalization-weighted index published since 1957 of the prices of 500 large-cap common stocks actively traded in the United States. The stocks included in the S&P 500 are those of large publicly held companies that trade on either of the two largest American stock market exchanges; the New York Stock Exchange and the NASDAQ.
The index focus is U.S.-based companies although there are a few legacy companies with headquarters in other countries. Any new companies added to the index are U.S. based, and, when a U.S. company shifts its headquarters overseas, it is replaced by a U.S. company, as happened when Transocean moved from Houston to Switzerland in 2008.
After the Dow Jones Industrial Average, the S&P 500 is the most widely followed index of large-cap American stocks. It is considered a bellwether for the American economy, and is included in the Index of Leading Indicators. Many mutual funds, exchange-traded funds, and other funds such as pension funds, are designed to track the performance of the S&P 500 index. Hundreds of billions of US dollars have been invested in this fashion.
The index is the best known of the many indices owned and maintained by Standard & Poor's, a division of McGraw-Hill. S&P 500 refers not only to the index, but also to the 500 companies that have their common stock included in the index. The ticker symbol for the S&P 500 index varies. Some examples of the symbol are ^GSPC, .INX, and $SPX. The stocks included in the S&P 500 index are also part of the broader S&P 1500 and S&P Global 1200 stock market indices.