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Some financial or commodities instruments are traded on
established exchanges. Examples include most highly-capitalized
stocks,
which trade on exchanges such as the New York Stock Exchange, and
futures,
which trade on futures exchanges such as the Chicago Board of Trade. These
instruments are called exchange traded.
An instrument is traded
over-the-counter (OTC) if it trades in some context other than a
formal exchange. Most debt instruments are traded OTC with investment
banks making markets in specific issues. If someone wants to buy or sell a
bond, they call the bank that makes a market in that bond and ask for
quotes. Many derivative
instruments, including forwards,
swaps and most exotic
derivatives are also traded OTC. In these markets, large financial
institutions serve as derivatives dealers, customizing derivatives for the
needs of clients.
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 liquidity
Used in various senses, all relating to availability of, access to, or
convertibility into cash.
settlement
In finance, performance on a contractual obligation.
transaction costs
Direct costs associated with transacting trades.
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http://www.riskglossary.com
copyright © Glyn A. Holton,
1996
Although the information in
this website has been presented with care and obtained from sources the author believes to be reliable, there is no guarantee that it is
accurate. Such information may be incomplete, condensed, outdated or presented with
errors. The content of the website is for information purposes only. It is
provided gratuitously, so the author shall not be liable under any
theory for any damages suffered by any user. The author does not
provide investment advice, and this website is not a vehicle for communicating
investment advice. |
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