The right to buy and accept a share (option) is a security which represents the right of its holder either to exercise or not exercise a transaction at a certain date. In the case of a call option this means the right to buy or accept a share. The counterparty is obliged to realise the trade should the other party wish it.
Characterises the risk of a bank having inadequate capital reserves in view of the risks it is undergoing.
Current ČNB (Czech National Bank) and BIS regulations define capital adequacy as the ratio between capital and risk-weighted assets.
When capitalising, i.e. when a company uses its own funds to increase its registered capital, new shares are created, without the company gaining new funds. During the course of this procedure shares are created by the transformation of past years’ retained profit. Essentially, this is merely an accounting procedure. The retained profit account in the balance sheet is reduced by the nominal value of the issued shares while the company’s registered capital account is increased by the same amount. Subsequently, the company divides these additional shares among its shareholders in proportion to the number of shares held by each shareholder.
Capital markets represent markets with shares, and markets with credits and loans whose original maturity is greater than one year.
Money markets financial instruments are usually more liquid than capital markets financial instruments.
By entering the order of “collection”, the owner of the account (the payer) gives the bank the account numbers of those entities which he/she permits, by collection, to debit his/her account. With SIPO collections, the client doesn’t need to notify these entities about entering an order for the collection.
Commodity markets are classified as financial markets only in the case of the precious metals (gold, silver and platinum) market. Gold is sometimes considered to be currency. In that case it falls under the category of currency markets..
Saving in a building society is a form of saving where a client deposits money to an account at a building society, for which interest is added annually (usually in the amount of 2%) together with a state subsidy.
After 24 months and after fulfilling further conditions determined by the building society, the client has a claim to a credit (usually with an interest rate of 3 – 5%). A credit can be provided by the building society and used by the participant only to finance his housing needs.
The building society can provide credits to the participant for covering the costs connected with his housing needs even in cases where the participant does not yet have a claim to receive the credit, and the building society can provide credit only up to the target savings amount.
A coupon may be issued as a bearer security in order to enable the right to a return on shares, interim certificates, bonds or participation certificates to be exercised. Coupons are generally paid on an annual or semi-annual basis.
The determination of the credit risk long-term instruments of companies (i.e. of debentures, credits and loans) is a complex process. It is not surprising that professional investors and investment counsellors try to find ways to simplify this process.
In the USA, where debt financing is a more important source of financing companies than, say, in the United Kingdom, there are a number of specialised companies which deal in ratings of individual debt instruments.
The most popular companies are Moody’s, Standard and Poor, and Fitch and Co. Ratings are assigned to the country, companies and certain debt issues.
Companies are rated according to their size, relative volume of debt to financing of its activity, and the share in the profit determined to finance the debt.
Also considered are factors of a qualitative character. With different companies these indices are included with different weighting, which can result in various ratings.
Currency (foreign-exchange) markets
This refers to debt, share or commodity markets, with the instruments being denominated in foreign currency. This also refers to the money market in various currencies (i.e. purchase of funds in one currency with funds in another currency).