Financial Instruments Quiz

Transferable financial instruments that represent ownership or debt in an entity's assets.

A market where buyers and sellers trade securities, facilitating liquidity and price discovery for financial instruments.

Companies, government, and financial institutions issue securities to raise capital.

Shares representing ownership in a company, offering voting rights and potential dividends.

Bonds issued in a currency different from the company's home currency.

The Securities Contracts (Regulation) Act, 1956 defines securities.

The flow of funds between different entities, including households, businesses, and the government, through the securities market.

The process of making a security certificate physically available after it was previously held in a dematerialized or electronic form.

Depositary Receipts(DRs) allow investors to buy shares of a foreign company without directly investing in that country's stock market. They are issued in a different currency than the issuing company's shares.

DRs allow investors to buy shares of a foreign company without directly investing in that country's stock market.

DRs can be converted to local shares and vice versa, following the country's regulations.

Indian Depository Receipts (IDRs) are issued by Indian companies and are primarily traded on Indian stock exchanges.

Commodities are homogenous goods that are interchangeable, such as gold bars or crude oil. They are classified as 'hard' (mined resources) or 'soft' (agricultural products).

Investing in commodities can help preserve the value of your investments by hedging against inflation.

A Commodity ETF is an exchange-traded fund that pools investments in a basket of commodities. It allows you to invest in commodities without owning them directly.

Managed futures contracts are investments managed by professionals. They involve buying or selling assets at a set price in the future, enabling investors to profit from price changes without owning the underlying commodity.

A type of bond issued in a currency different from the issuer's home currency, often convertible to equity.

Debt instruments whose interest payment is tied to the performance of an underlying equity asset, such as the S&P Sensex or individual stocks.

Similar to ELDs, but their interest payments are linked to the performance of an underlying commodity, such as gold or oil.

A type of asset-backed security (ABS) that is secured by a mortgage or pool of mortgages.

A security that is backed by assets, such as mortgages, car loans, or credit card receivables.

The market where companies initially issue new securities (shares, bonds) to raise capital.

The market where existing securities are bought and sold, providing liquidity for investors.

The first sale of shares to the public by a company to raise equity capital.

Buying or selling assets to profit from short-term market fluctuations, potentially leading to large gains or losses.

Taking a position to offset potential losses from another position, limiting both gains and losses.

Simultaneously buying and selling the same asset in different markets to profit from temporary price discrepancies.

Using securities as collateral to secure a loan, with the shares frozen for transactions until the debt is repaid.

Converting physical share certificates into electronic records held in a dematerialized account.

Registered with SEBI, they help issuers (companies) enter the market and manage the process of issuing securities.

Large organizations like banks, insurance companies, and mutual funds that invest large amounts of money.

Overseas entities registered with SEBI that invest in Indian securities.

Instruments issued by registered FPIs that allow overseas investors (who might not be directly registered) to invest in Indian markets.

Funds managed by professionals who collect money from many investors and use it to buy securities on their behalf.

Firms that primarily insure assets like buildings, vehicles, etc., and often invest a portion of their funds in equities, bonds, and government securities.

Funds that pool employee retirement savings, investing them for long-term growth to provide a steady income in retirement.

Investment vehicles that provide funding to start-up companies in their early stages of development.

Trades that settle on the spot date, typically two business days after the trade date. This means the buyer receives the asset and the seller receives the payment within a short timeframe.

Contracts that allow the buyer the right, but not the obligation, to buy or sell an underlying asset at a predetermined price by a specified date, with the buyer paying a premium for this right.

Exchange-traded forward contracts that are standardized in terms of quantities, quality, and delivery terms, traded on stock exchanges. They are subject to strict margin requirements and offer settlement guarantees by clearing corporations.

A derivative contract where two parties agree to exchange cash flows in the future based on a pre-arranged formula, helping them manage risks associated with volatile interest rates, currency rates, and commodity prices.

Futures are available for various assets like equities, commodities, currencies, and interest rates. This expands the scope of risk management and investment opportunities.

Options contracts can be traded in both Over The Counter (OTC) and Exchange-Traded Markets. This means you can buy and sell options through private negotiations or on organized exchanges.

A swap is an agreement between two parties to exchange cash flows based on a pre-arranged formula. This helps them manage their own financial risks.

Spot trades are common in equity markets in India. This reflects the focus on short-term trading and quick settlement in these markets.