Gonzaga, Mac Kirby S.

Security Analysis
BSBA-FM 3-11s Activity #1
FINANCIAL MARKETS AND INVESTMENTS

This lesson focuses on financial market mechanisms, phenomena, and other relevant fields.
Markets are locations where buyers and sellers negotiate the exchange of assets, goods, or services.
It can be a physical location or an online transaction, as long as market participants can use and
trade their resources efficiently.

Securities, in particular, are financial instruments that are traded in the financial market. It
has monetary value, which could represent an ownership position, a credit relationship with a
specific entity, or ownership rights represented by an option. There are various types of securities
that were issued to raise capital. The first type of security is an equity security, which represents
a shareholder's ownership interest in a company. It is a type of capital stock that can generate a
profit based on the entity's performance or capital gains when sold. Stockholders have voting rights
and some control over the company. Following that is debt security, which represents borrowed
money that must be repaid. It includes terms that describe the loan's size, interest rate, and maturity
or renewal date. People who own this security are entitled to regular interest payments, principal
repayment, and other contractual rights for a set period of time. Lastly, a hybrid, as the name
implies, combines the characteristics of equity and debt securities. This includes equity warrants,
convertible bonds, and preference shares.

Market segments are one of the most important aspects that people should understand in
order to fully comprehend financial market mechanisms. This will assist investors in determining
which markets to profit from and which securities to invest in. One of it is the money market, an
organized exchange market in which borrowers and lenders trade short-term instruments or
investments maturing in one year or less. The money market is notable for its low risk and low
expected returns. It enables large institutions, such as banks, to sell short-term securities to fund
their short-term cash flow needs, while individual investors can invest small sums in a low-risk
environment. Treasury bills, commercial paper, certificates of deposit (CD), and other financial
instruments with a high degree of security and low returns can be traded in the money market.
Another is capital market, which is an exchange system platform where capital suppliers and
capital demanders exchange funds. This market is typically used as a trading venue for equity or
debt instruments that are issued and sold over a long period of time. It allows investors to direct
excess capital to entities in need of funding for various projects or investments, improving
Gonzaga, Mac Kirby S. Security Analysis
BSBA-FM 3-11s Activity #1
transactional efficiencies. Next is derivatives, which is a market for financial instruments that
focuses on contracts or options that are based on the values of their underlying assets. There are
some alternative investments that an investor could make that are not considered conventional
investments, such as stocks or bonds. It could be Exchange-traded Funds (ETFs), Hedge Funds,
Real Estate, or other investments with a complex nature and risks that could only be handled by
institutional investors.

The lesson also covered the different types of markets, which are divided into two
categories. The primary market, which is a market where companies sell new stocks or bonds
publicly in this market for the first time, usually through an initial public offering (IPO). When
investors purchase securities on the primary market, the seller hires an underwriting firm to review
them and prepare a prospectus outlining the price and other details of the securities to be issued.
In order for their issues to be approved and go public, companies must also file statements with
securities regulators such as the Securities and Exchange Commission (SEC). Furthermore,
because transactions are geared toward large investors who can purchase a large number of
securities in a short period of time, small investors are unable to participate in the primary market.
Another type is the secondary market, where traders and investors buy and sell securities after they
have been issued to the general public in the primary market. It enables investors to trade freely
without interference from the issuing company, while also providing a continuous reflection of the
value of securities (prices) at any given time based on the best available information.

Since stocks and bonds are the most commonly traded assets, it is critical to understand
which trading platforms these securities are negotiated on by fund demanders and suppliers. The
stock market, where securities are bought and sold to allow stock market participants to raise
capital and obtain information for financial decisions The stock market is a part of the secondary
market, which is where investors trade stocks or bonds that were previously available in the
primary market. Because it is constantly scrutinized by regulating bodies, the stock market plays
a significant role in the economy, encouraging management efficiency among companies.
Furthermore, it provides a centralized channel for individuals to invest their money rather than
simply save it, allowing for quick and secure transactions. These exchanges can be physical or
electronic trading platforms, which results in more efficient trades and saves market participants
time. On the other hand, the bond market is a market for trading debt securities. Government
Gonzaga, Mac Kirby S. Security Analysis
BSBA-FM 3-11s Activity #1
bonds, treasury bills, corporate bonds, and other securities may be included. Its objective is to
provide a trading, negotiating, and settlement platform for fixed-income securities and their
derivatives. This is used by governments and corporations to raise capital. It also offers low-risk,
low-return security, in which investors lend money and charge interest for a set period of time.
This debt securities provide a consistent income stream while also giving holders first priority over
other securities in the event of liquidation.

In these various financial markets, market participants negotiate deals and trade with
various securities in order to raise capital and profit. They could be identified as issuers, which
are entities such as companies that create, register, and sell securities to fund their operations. An
investor which is any person, company, or organization who commits capital with the expectation
of receiving financial returns. Furthermore, underwriters are market participants who evaluate
and assess the risk of another party for a fee. Another participant is a broker-dealer, who handles
transactions between buyers and sellers of securities. Finally, a regulatory agency is in charge of
enforcing and implementing policies or rules in the market.

These are important lessons to understand and remember as we delve deeper into other
aspects of security analysis. Learning about the financial market and investments can help us fully
comprehend the significance of investing while also providing a foundation for what we need to
analyze in the business world.