3. Capital Market
• Capital Market is a place where the entities engage in trading of different
financial instruments (long-term debts & equity-backed securities)
• Types of Capital Market –
a. Primary Market – For issue of new securities
b. Secondary Market – For trading of existing securities
• Functions of Capital Market –
a. Linking investors and savers
b. Boosting economic growth
c. Minimizing transaction costs and information costs
d. Derivative trading
4. Hedging
• Hedging is an insurance-like investment which to restrict losses which arises due to
fluctuation of price
• Reducing and eliminating the risk of uncertainties
• Used to safeguard investment from losses
• Types of Hedges
Forward Contract
Futures Contract
Money Markets
• Advantages of Hedging
used for locking profit
limits losses to a great extent
helps in increasing liquidity in financial markets
offers a flexible price mechanism
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• Dividends are typically paid on a quarterly basis,
though some pay annually, and a small few pay
monthly.
Definition
A dividend is a payment from a company to a
shareholder who has invested in shares of the
company
Non - Dividend Paying Companies
Dividend Paying Companies
• Well established
• Utility Related
• Use dividends to drive
investor interest
• electricity (ex: S&P) and
oil (ex: Chevron).
Dividends
Cash
Stock
• New, rapidly growing
• Mostly Tech based
• Rely on stock growth
• Ex. Amazon
6. Basel Accord
• Three series of banking regulations set by the BCBS – 1980s
• "financial stability by improving supervisory knowhow and the
quality of banking supervision worldwide“
“monitoring and ensuring the capital adequacy”
• Basel I – 1988 – Capital Adequacy Of Financial Institutions
• Basel II – 2004
• Three main pillars
• Minimal capital requirements,
• Regulatory supervision, and
• Market discipline
• Basel III – 2010 (Agreed) – Based on Three Pillars with added
focuses
• Regulation,
• Supervision and
7. Capital Structure
• Combination of debt and equity used by a company to finance its
overall operations and growth
• Debt comes in the form of bond issues or loans.
• Equity comes in the form of stocks
• Debt is a borrowed money that is needed to pay back to the lender and
comes with an interest expense
• Equity consists of ownership rights in the company without the need
to pay back any investment done
• Mostly debt to equity ratio is referred when analysing the capital
structure
