Examples of asset-backed securities in the following topics:
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- Other bonds include register vs. bearer bonds, convertible bonds, exchangeable bonds, asset-backed securities, and foreign currency bonds.
- Asset-backed securities are bonds whose interest and principal payments are backed by underlying cash flows from other assets.
- Examples of asset-backed securities are mortgage-backed securities (MBS's), collateralized mortgage obligations (CMOs), and collateralized debt obligations (CDOs).
- The main examples of subordinated bonds can be found in bonds issued by banks and asset-backed securities.
- The senior tranches get paid back first, the subordinated tranches later.
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- Then investors buy the securities to earn the return on the fund's assets.
- Securitization of mortgages has its own named, mortgage asset-back securities (ABS).
- Even in 2013, banks held $1.3 trillion in asset-back securities.
- Investment banks packaged the bonds from mortgage asset-backed securitized into Collateralized Debt Obligations (CDOs).
- Mortgage asset-backed securities and collateralized debt obligations attracted large sums of money to U.S. housing market, causing the rapid appreciation of housing prices.
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- There are many types of financial risk, including asset-backed, prepayment, interest rate, credit, liquidity, market, operational, foreign, and model risk.
- Asset-backed risk affects investments in asset-backed securities such as home loans.
- Interest rate risk refers an asset whose terms can change over time, such as a Variable Rate Mortgage payment.
- Liquidity risk is the risk that an asset or security cannot be converted into cash in a timely manner.
- Classify different securities by the types of financial risk associated with the investment opportunity
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- Capital notes are a form of convertible security exercisable into shares.
- Asset-backed commercial paper (ABCP) is a form of commercial paper that is collateralized by other financial assets.
- This type of loan, often short term, is secured by a company's assets.
- Real estate, accounts receivable (A/R), inventory and equipment are typical assets used to back the loan.
- The loan may be backed by a single category of assets or a combination of assets (for instance, a combination of A/R and equipment).
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- The price of a security is the market determination of the value of the underlying asset.
- The price of a security reflects the value of the asset underlying it.
- Therefore, the market price for a security indicates the consensus value placed on its asset by all the buyers and sellers in the market.
- The choice of which method to use depends in part on what kind of security one is valuing.
- This is because if you have a dollar today, you can do all kinds of things with it: invest it, use it to buy something you want, or pay back a debt.
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- The Fed has two important assets: government securities and discount loans.
- Usually the Fed buys and sells U.S. government securities.
- When the Fed buys U.S. government securities, we call it an open-market purchase because the Fed's assets increase, expanding the monetary base.
- The Fed can sell U.S. government securities, called an open-market sale.
- A Fed check is not backed by money per se.
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- Quick assets include those current assets that presumably can be quickly converted to cash at close to their book values.
- A company with a Quick Ratio of less than 1 cannot pay back its current liabilities.
- Quick Ratio = (Cash and cash equivalent + Marketable securities + Accounts receivable) / Current liabilities.
- Cash and cash equivalents are the most liquid assets found within the asset portion of a company's balance sheet.
- Cash equivalents are assets that are readily convertible into cash, such as money market holdings, short-term government bonds or Treasury bills, marketable securities, and commercial paper.
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- Securities are the largest holdings of the Fed's assets, and they consist of U.S. government securities: T-bills, T-notes, and T-bonds.
- The Federal Reserve held $1.7 trillion in securities in 2012.
- Mortgage-Backed Securities: The Federal Reserve purchased mortgage securities from the commercial banks and public corporations during the 2008 Financial Crisis.
- The Fed purchased $835 billion in mortgage-back securities, removing the bad loans from the banking industry.
- Mint, making it an asset.
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- In business, economics, or investment, market liquidity is an asset's ability to be sold without causing a significant movement in the price and with minimum loss of value.
- Maintaining a balance between short-term assets and short-term liabilities is critical.
- For an individual bank, clients' deposits are its primary liabilities (in the sense that the bank is meant to give back all client deposits on demand), whereas reserves and loans are its primary assets (in the sense that these loans are owed to the bank, not by the bank).
- The investment portfolio represents a smaller portion of assets, and serves as the primary source of liquidity.
- Investment securities can be liquidated to satisfy deposit withdrawals and increased loan demand.
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- The Fed formed the Federal Open Market Committee (FOMC) to implement monetary policy by buying or selling assets like U.S. government securities.
- Dealer who bought the security has no obligation in the future to sell the security to the Fed or vice-versa.
- Usually, the dealer buys back the government security within 15 days.
- The Fed sells securities to the dealers, and the dealers sell the securities back to the Fed for a specific price and on a particular data in the future.
- Although some countries have a small market for government securities, central banks can buy and sell any assets.