FI 414 Lecture Notes - Lecture 2: Bankruptcy Of Lehman Brothers, Money Market Fund, Market Liquidity
21 Feb 2018
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Fixed income: money market, bond market, preferred stock (can also be categorized as equity) Call money rate applies for investors buying stock on margin. Loan may be called in by broker: repurchase agreements (rps) Short-term sales of packaged securities (preferably tbills or highly liquid securities) with promise to repurchase at higher price. Many rps are overnight; term rps may have a 1- month maturity. If collateral is riskier, you get less money: reverse rps. Bonds (more than 10 yrs) vs. notes (1-10 years) Bond market: capital market fixed income, government issued: tbonds and tnotes, treasury inflation protected securities (tips) Principal adjusted for changes in the consumer price. Marked with a trailing i in quote sheets: bids and asks. Investor buys at ask and sells at bid. Ask is always slightly higher to represent the security dealer"s compensation for providing a quick and easy transaction. Coupons also expressed as %age of par, but are annual not semi annual: agency issues.
