Task 3 Complete the following sentences with the information from the text.
1. Regular payments are received by …
2. For municipalities, companies and other commercial enterprises securities represent a means ….
3. In comparison to a bank loan securities …
4. Among institutional investor …
5. A stock exchange is a place where …
6. Electronic trading systems are …
7. A combination of private and public placement allows …
8. The disadvantage of the secondary market is that …
9. In the US the sale of securities is …
10. In considering the options for investment you are to be aware of …
Task 4 Note down:
The advantages and disadvantages of being an equity security owner
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2
3
4
5
The advantages and disadvantages of being a debt security owner
1
2
Types of equity securities
1
2
Types of debt securities
1
2
3
4
Types of hybrid securities
1
2
3
VOCABULARY
Collocations
Task 5 Find the words and word combinations in the text above that mean the same as the following:
| 1. demonstrate proprietary rights concerns |
| 2. sold as |
| 3. do not have rights for time-honored returns |
| 4. benefit from the increase in the value of a company’s assets |
| 5. via voting rights |
| 6. have a stake in the profits left |
| 7. lay down provisions for the amount of money borrowed, the proportion of profits and renewal date |
| 8. paying back the initial size of the loan |
| 9. reclaimed by the company |
| 10. backed by collateral |
| 11. options issued by the company itself that give shareholders the right to purchase stock within a certain timeframe and at a specific price |
| 12. bonds that can be converted into shares of common stock in the issuing company |
| 13. company stocks whose payments of interest, dividends or other returns of capital can be prioritized over those of other stockholders |
Task 6 Read the extract from an article about investment banking and complete the gaps with the words from the box. Look up the definitions of any words you don’t know.
a. alter the nature of
b. equilibrium prices and quantities
c. firm-investment bank relationships
d. investment banking services
e. non-convexities
f. practitioners of the field
g. sweeping changes in regulations and information technology
h. syndicates, product innovation, heterogeneity of products and services
i. tailor-made to each particular detail
j. their effect on concentration
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k. their implications for industry structure
l. their industry-level implications
In this paper, we seek to understand the industrial organization of investment banking, i.e. how the technology of production of -----------------1---------------- shapes market structure, thus determining --------------2---------------. To do so we concentrate on the fundamental economics of the technology, i.e. we identify the key------------------3---------------. We are well aware that we are abstracting away many complexities of the investment banking business like-----------------4--------------- or investment bank differentiation. Also, we take as given some of the key features of --------------5----------------- which have been identified by ---------------------6------------; we do not provide an equilibrium logic for their existence but instead explore -----------------7----------------. Nevertheless, we think that this approach is necessary and useful. First, many of the ---------------8----------------, which many think will fundamentally ------------------9-------------------- the financial services industry, can only be evaluated with models that work out ----------------10-----------------. In turn, to do such an analysis it is necessary to identify whether and how these changes interact and affect the fundamental economics of the technology. Second, many of the policy questions that these changes motivate, such as --------------11------------- or their antitrust implications, are about industry structure. Third, policy interventions must by necessity be aimed at industry-level variables and cannot hope to be ----------------12----------------------.
Task 7 Below you see a text about bonds and derivatives. The sentences have been jumbled. To find out information about these types of securities restore the correct order of the sentences.
Bonds
a. Although bondholders are not “owners” of the bond issuer in the same way that equity shareholders are, they maintain a claim on its assets as creditors.
b. Bonds can be thought of as loans issued by companies or municipalities: they are often referred to as debt.
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c. For example, a company may issue a five-year bond that pays a 7 per cent annual return.
d. If a company cannot pay its bond obligations, bondholders may take control of its assets.
e. Lenders normally find it easier to redeem assets of the company. Institutions such as banks will normally be reimbursed before individual bondholders.
f. Like loans, bonds have a fixed term of existence and pay a fixed rate of return
g. This company is then under a contractual obligation to pay this interest amount to bondholders, as well as return the original amount at the end of the term.
Derivatives
a. Derivatives are also a risk management tool: depending on how they are used and how leveraged they are, they can either increase or reduce the risk of an investment.
b. In recent years derivatives have become a major part of the European asset management industry.
c. Index options allow investors to gain wider exposure to the market rather than just single securities.
d. Major asset management firms have implemented systems to enable the widespread use of derivatives as an investment and risk management tool.
e. Simply put, a derivative is any financial instrument whose payoffs are derived from the value of an underlying variable at a time in the future.
f. Stock and index options are widely used by professional investors to hedge their share portfolios.
g. The derivatives market received a lot of attention in 2008, most of it negative.
h. The US government was forced to spend $85 billion bailing out global insurance giant American International Group (AIG), which was crippled by losses on credit default swaps (CDSs), a type of derivative.
i. Types of derivatives include options, warrants and futures.
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