Liquidity Premium Theory -ANS - Investors will only hold long-term maturities if they are offered at a premium to compensate for future uncertainty which increases with the maturity of the asset.
Unbiased Expectations
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Liquidity Premium Theory -ANS - Investors will only hold long-term maturities if they are offered at a premium to compensate for future uncertainty which increases with the maturity of the asset.
Unbiased Expectations Theory -ANS - The term structure of interest rates, at a given time, the yield curve reflects the marketers current expectation of future short-term rates.
Market Segmentation Theory -ANS - Individual investors have certain maturity needs. Interest rates are determined by supple and demand conditions within a particular maturity need or market segment.
Securities Firms -ANS - Specialize in primarily purchase, sale, and brokerage of securities.
Investment Banks -ANS - Primarily engage in originating , underwriting, and distributing issues of securities.
Private Offering -ANS - investment bank places the securities with on or a few large institutional investors
Public Offering -ANS - the securities may be underwritten either of best-effort or firm commitment basis and the securities may be offered to the public at large.
Agents -ANS - Act with best-effort underwriting, on a fee basis related to their success of placing the issue. Risk on the issuer
Principal -ANS - Firm commitment underwriting, purchasing securities at one price and seeking to place them with public investor at higher price. Risk on investment bank.
Venture Capital -ANS - Professionally managed pools of money used to finance new and often high risk firms.
Market Making -ANS - Create a secondary market in an asset. Always wiling to buy and sell, while trying to maintain liquidity
Trading -ANS - Motivated to make money, and have no obligation to stay in the market.
Position Trading -ANS - Purchase of large blocks of securities to facilitate smooth functioning
Pure Arbitrage -ANS - Buying an asset in one market at one price and selling it immediately in another market at a higher price.
Risk Arbitrage -ANS - Buying blocks of stock in anticipation of some information release, such as merger or take over.
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