Short Notes (Investment banking)

Invested banking: An investment bank is a financial institution that assists individual corporation and government in raising capital by underwriting or acting as clients agent in the issuance of securities. Merchant bank: A merchant bank is a financial institution, which provides capital to company in the form of share ownership instead of loans. Right issue: The rights issue involves selling of securities to the existing shareholders in proportion to their current holding. Prospectus: A formal written document that advertises or describe about a new offer or forthcoming financial security in order to attract or inform to its potential buyers. Best efforts: An agreement in which an underwriter promises to make a full-fledged attempt to sell as much as of an IPO as possible to the public rather than buying it own. Hostile takeover: The acquisition of one company (called the target company) by another (called the acquirer) that is accomplished not by coming to an agreement with the target companys management, but by going directly to th companys shareholders or fighting to replace management in order to get the acquisition approved. Market order: An order that an investor makes through a broker to buy or sell a security at the best available price. Limit order: An order by which an investor specify the most he is willing to pay (buy) or the least he is willing to accept (sell) for a security. Market maker: A company, broker or individual conduct both buying and selling securities at a specified price. Financial holding company: A financial institution engaged in nonbanking activities that offers customers a wide range of financial services, including the opportunity to purchase insurance product and invest in securities. Buyback: The repurchase of outstanding shares by a company in order to reduce the number of shares in the market. Delisting: Removal of a stock from the exchange it was traded on caused usually by a serious violation of the exchange rule or inability to meet financial commitment when they fall due. Syndicated loan: Large loan arranged jointly by two or more financial institutions to share the risk involved. Spin off: An independent company created from an existing part of another company through a divesture, such as a sale or distribution of new shares. Hive off: Separating a large company into a small subsidiary business. Structure finance: A service that generally involves highly complex financial transaction offered by many large financial institutions for companies with unique financial needs. Collateralized bond obligation (CBO): Investment grade bonds backed by a collection of junk bonds with different levels of risk. Collateralized loan obligation (CLO): A security backed by a pool of commercial or personal loans, structure so that there are several classes of bondholders with varying maturities called tranches.

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Short Notes (Investment banking)

Collateralized debt obligations (CDO): Are a type of structured asset backed security with multiple tranches that are issued by special purpose entities and collateralized by debt obligations including bonds and loans. Tranches: A piece portion or slice of a deal or structured financing. This portion is one of several related securities that are offered at the same time but have different risks, reward and maturities. Collateralized mortgage obligation (CMO): A type of mortgage backed security that creates separate pools of pass through rates for different classes of bondholder with varying maturities. Leverage buyout: The acquisition of another company using a significant amount of borrowed money (bonds or loans) to meet the cost of acquisition. Management buyout: It occurs when the current management of a company acquires a controlling interest or the entire interest in a company from existing shareholders. Wealth management: It is an investment advisory service for high net worth individuals. Proprietary trading: It occurs when a firm trades stocks, bonds or other financial instrument, with the firms own money as opposed to its customers money. Hedge fund: Hedge fund is a private actively managed investment fund. It seeks to provide returns to their investors by investing in a diverse range of markets, investment instrument and strategies. Venture capital: Money provided by investors to startup firms and small business with perceived long-term growth potential. Restructuring: A significant modification made to the debt, operations or structure of a company. Sell off: The rapid selling of securities such as stocks, bonds and commodities. The increase in supply leads to a decline in the value of the security. Scenario analysis: The process of measuring potential effect on net revenues by abnormal market movement. Value at risk: It is the potential loss in value of firms positions due to adverse movements in market risk factors over a defined time horizon with a specified confidence interval. Underwriting: It is an agreement whereby the underwriter promises to subscribe to a specified number of share or debenture in the event of public not subscribing to the issue. Preferential issue: An issue of equity by a listed company to selected investors at a price, which may or may not be related to the prevailing market price. Green she option: It denotes an option of allocation shares in excess of the share included in the public issue. Lock in period: Period of time during which a share cannot be transferred or exchanged. Shelf prospectus: A type of prospectus that allows to register a new issue security without selling the entire issue at once rather than selling time-to-time basis.

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Short Notes (Investment banking)

Red herring prospectus: It is the preliminary prospectus in which some elements are marked with red ink indicating that parts may be changed in the final prospectus. Margin loan: A margin loan is a loan made by a broker to an investor for the purpose of buying securities. Sweat equity: Extra percentage of a firm's common stock (ordinary shares) allocated to the senior executives (over and above their current shareholdings) as an additional motivation for continuing hard work for the firm's success. Securitization: The process through which an issuer creates a financial instrument by combining other financial assets and then marketing different tiers of the repackaged instruments to investors. Tombstone advertisement: An advertisement in a business newspaper or magazine, placed by an investment bank, announcing an offering and listing the syndicate members. Dilution: A reduction in the ownership percentage of a share of stock caused by the issuance of new stock. Registration statement: A statement filed with the SEC that discloses all material information concerning the corporation making a public offering. Straight bond: Bond which will pay back the principal on its maturity date, will pay a specified amount of interest on specific dates, and does not carry a conversion privilege or other special features. Stock-purchase warrant: A type of security issued by a corporation (usually together with a bond or preferred stock) that gives the holder the right to purchase a certain amount of common stock at a stated price; "as a sweetener they offered warrants along with the fixed-income securities. Ex-Rights Date: The date on which any right on a stock that has been declared, but not distributed, belongs legally to its seller rather than the buyer.

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