Country or sovereign risks that can result in financial claims of foreigners being repudiated or becoming unenforceable because of a change of government or in government policy, in a country

Securities issued at less than their face value (at a discount), for which the difference between the face value and the discounted issue price represents the return to the investor

Promissory notes issued on behalf of the Commonwealth Government by the RBA that allow the government to borrow money from the money markets

The markets in which foreign currencies are bought and sold

The difference between the fixed price paid for securities and the price at which they are resold, constituting the underwriter's gross profit

A financial market in which financial claims are first sold as new issues. All financial claims have a primary market.

The fluctuation in the earnings or value of a financial institution that arises from changes in exchange rates

The possibility that the investor's expected return will not be realised

The market for short-term borrowing or lending of large amounts of any currency held in a time deposit account outside its country of origin

Those who act as intermediaries between buyers and sellers but do not take title to the securities traded

The markets for buying and selling financial instruments

Markets in which capital goods are financed with stock or long-term debt instruments

Primarily a dealer market in which securities not sold on one of the organised exchanges are traded

A market in which options are traded

The risk-bearing function of the investment banker. Underwriting occurs when the investment banker guarantees fixed proceeds to security issuers while uncertain of the eventual resale price.

Promissory notes in denominations of $100 000 or more, which can be resold in secondary markets and are issued by banks rather than large corporations

Institutions that issue liabilities to SSUs and use the funds so obtained to acquire liabilities of DSUs

The system that permits the settlement of transactions (i.e. the transfer of funds) within the financial system

An economic unit whose income in a period exceeds expenditure. SSUs often purchase fi nancial claims issued by DSUs

The market situation in which the costs of conducting transactions are as low as possible

The withdrawal of funds that were previously invested through financial intermediaries so that they can be invested directly in the financial markets

The price offered by a dealer to purchase a given security

An economic unit whose expenditure in a period exceeds current income. A DSU sells financial claims on itself (liabilities) or sells equity to obtain needed funds

The risk that changes in interest rates will cause an asset's price and realised yield to differ from the purchase price and initially expected yield

The bid price plus a price 'spread' that provides the dealer's profi t; the lowest price at which the dealer is willing to sell the security

Long-term IOUs that represent a claim against a firm's assets

The purchase of direct claims (IOUs) with one set of characteristics from DSUs and their transformation into indirect claims (IOUs) with a different set of characteristics

A financial market in which participants buy or sell previously issued financial claims

A financial instrument that represents an ownership claim on a firm's assets. Shareholders share in the distributed earnings and net worth of a company.

A contract that allows the holder to buy (or sell) a specifi ed asset at a predetermined price before its expiration date. The predetermined price is called the strike price.

Those who are in the security business acting as principals rather than agents. The dealer buys for his or her own account and sells to customers from his or her inventory.

A person who provides financial advice and underwrites and distributes new investment securities

A market in which people trade contracts for future delivery of securities, cash goods or the value of securities sold in the cash market

The unsecured promissory note (IOU) of a large business

The RBA's control of the level of funds in the market and the level of interest rates

Short-term discount securities (bank-accepted bills and nonbank bills) that allow borrowers with good credit ratings to access funds from the money markets

A contract to buy (or sell) a particular type of security or commodity from (or to) the futures exchange during a predetermined future time period

Markets in which commercial banks and other businesses adjust their liquidity position by borrowing, lending or investing for short times

The distribution of equity securities in which the investment banker acts only as the company's agent and receives a commission for placing the securities with investors

In over-the-counter markets, the difference between the bid price at which a dealer is willing to buy a security and the ask price at which he or she is willing to sell the security. Dealers make a profi t by selling at a higher price than the price they pay.

Long-term loans secured by real estate

Written promises to pay a specific sum of money (the principal) plus interest for the privilege of borrowing money over a period of time. Financial claims are issued by DSUs (liabilities) and purchased by SSUs (assets).

The market situation in which market prices refl ect all relevant information about the securities

The market situation in which funds are allocated to their highest value use

Funds supplied in the form of a loan

Long-term debt obligations of governments used to finance capital expenditure for things such as schools, highways and airports

The risk that a financial institution will be unable to generate sufficient cash inflow to meet required cash outflows

The risk that the borrower will not pay back all or part of the interest or principal as specified in the loan agreement

The medium of exchange used in the financial system

Funds supplied in the form of the acquisition of an ownership share of a business

Financing in which DSUs issue financial claims on themselves and sell them for money directly to SSUs. The SSU's claim is against the DSU, not a fi nancial intermediary.