Seigniorage

Great example from Wikipedia, baby: The “50 State” series of quarters (25-cent coins) was launched in the U.S. in 1999. The U.S. government planned on a large number of people collecting each new quarter as it rolled out of the U.S. Mint, thus taking the pieces out of circulation[citation needed]. Each set of quarters is worth $14.00 (a complete set includes quarters … Continue reading

Basic Stock Market Explainer

(via Howstuffworks.com, “How Stocks and the Stock Market Work”) Stock Markets A share of stock is a share in the ownership of a company. When you buy a share of stock, you’re entitled to a small fraction of the assets and earnings of that company. Assets include everything the company owns (buildings, equipment, trademarks) and earnings are all of the … Continue reading

Mergers & Acquisitions Basics

M&A— a company must have a strategic rationale for completing an M&A transaction. The goal should be to drive either an immediate or a near-term increase in shareholder value. Principle constituents of any M&A transaction – shareholders, employees, regulators, union leaders, credit rating agencies, equity research analysts, debt holders. Investment bankers have to render a fairness opinion to companies involved, … Continue reading

Basic Investment Banking/Hedge Fund Definitions

Investment banking: work with corporations that want to raise capital through public or private capital markets, risk-manage existing capital, complete M&A related transaction. Provide financing through direct investments in corporate equity and debt securities, provide loans.  A bond is debt in the form of a security, issued as a long-term obligation of a borrower with a … Continue reading

Shared Capitalism

notes from Kruse, Douglas L., Richard B. Freeman, and Joseph R. Blasi, eds. Shared Capitalism at Work: Employee Ownership, Profit and Gain Sharing, and Broad-Based Stock Options. (Chicago, London: University of Chicago Press, 2010). as well as from sources listed at bottom Shared Capitalism is defined by Kruse, Freeman, and Blasi as any of a … Continue reading

ESOPs

notes from Kruse, Douglas L., Richard B. Freeman, and Joseph R. Blasi, eds. Shared Capitalism at Work: Employee Ownership, Profit and Gain Sharing, and Broad-Based Stock Options. (Chicago, London: University of Chicago Press, 2010). And, just as a refresher, here’s Kruse et al.’s definition of an ESOP: In the US one major form for employee … Continue reading

Privately Held Companies

In our research on currency and securities printers, we’ve come across many privately held companies. As a brief review: Crane & Co. – privately held, still family-owned (non-family CEO) ABnote – privately held De La Rue – publicly traded, listed on the London Stock Market (DLAR) Giesecke & Devrient – privately held, still family-owned (non-family … Continue reading

Private Equity

The term private equity is a generic expression for investments in equity securities in companies which are not listed in any public stock exchange.  A private equity firm is an investment manager which raises pools of capital, typically in the form of private equity funds to invest. Private equity includes the following forms of investment: … Continue reading

Types of Stock

There are two kinds of stock: common stock and preferred stock. In general, owners of common stock have voting rights in a corporation as well as rights to receive distributions of money from the corporation (dividends). In a successful corporation, common stock ownership can be very lucrative. However, if a corporation is unsuccessful, common stock … Continue reading

Say’s Law

[from WIkipedia: http://en.wikipedia.org/wiki/Say%27s_Law] Say’s law, or the law of market, is an economic principle of classical economics named after the French businessman and economist Jean-Baptiste Say (1767–1832), who stated that “products are paid for with products”[1] and “a glut can take place only when there are too many means of production applied to one kind of product and not enough to another” … Continue reading

History of marketing thought (a start)

[from various parts of http://www.knowthis.com/principles-of-marketing-tutorials/what-is-marketing/history-of-marketing/ — multiple pages] In particular, the study of marketing led sellers to recognize that adopting certain strategies and tactics could significantly benefit the seller/buyer relationship. In the old days of marketing (before the 1950s) this often meant identifying strategies and tactics for simply selling more products and services with little regard for … Continue reading

Option

In finance, an option is a derivative financial instrument that specifies a contract between two parties for a future transaction on an asset at a reference price. The buyer of the option gains the right, but not the obligation, to engage in that transaction, while the seller incurs the corresponding obligation to fulfill the transaction. The price of an option derives from … Continue reading

Futures market

[From Wikipedia] A futures exchange or futures market is a central financial exchange where people can trade standardized futures contracts; that is, a contract to buy specific quantities of a commodity or financial instrument at a specified price with delivery set at a specified time in the future. These types of contracts fall into the category of derivatives. Such instruments are priced according to the movement of … Continue reading

Black-Scholes

[from Wikipedia] The Black–Scholes model (pronounced /ˌblæk ˈʃoʊlz/) or Black–Scholes-Merton is a mathematical model of a financial market containing certain derivative investment instruments. From the model, one can deduce the Black–Scholes formula, which gives the price of European-style options. The formula led to a boom in options trading and the creation of theChicago Board Options Exchange. lt is widely used by options market participants. Many … Continue reading

Markets vs. market systems

  from The Worldly Philosophers

Self-organizing capitalism / Catallaxy

[From Wikipedia] Capitalism Self-organization Austrian School economists have argued that capitalism can organize itself into a complex system without an external guidance or planning mechanism. Friedrich Hayek coined the term “catallaxy” to describe what he considered the phenomenon of self-organization underpinning capitalism. From this perspective, in process of self-organization, the profit motive has an important role. From transactions between … Continue reading

Weather derivatives

[from Wikipedia] Weather derivatives are financial instruments that can be used by organizations or individuals as part of a risk management strategy to reduce risk associated with adverse or unexpected weather conditions. The difference from other derivatives is that the underlying asset (rain/temperature/snow) has no direct value to price the weather derivative.

Mark-to-market accounting

[from Wikipedia] Mark-to-market or fair value accounting refers to accounting for the fair value of an asset or liability based on the current market priceof the asset or liability, or for similar assets and liabilities, or based on another objectively assessed “fair” value. Fair value accounting has been a part of Generally Accepted Accounting Principles (GAAP) in the United States since the early … Continue reading

Ticker symbol

[From Wikipedia] A stock symbol or ticker symbol is a short abbreviation used to uniquely identify publicly traded shares of a particular stock on a particular stock market. A stock symbol may consist of letters, numbers or a combination of both. “Ticker symbol” refers to the symbols that were printed on the ticker tape of a ticker tape machine. U.S. stock symbol history In the United States, modern letter-only … Continue reading

Arb

Hand Signaling, also known as arb or arbing, short for arbitrage, is a system of hand signals used on financial trading floors to communicate buy and sell information in an open outcry trading environment. The system is used at financial exchanges such as the Chicago Mercantile Exchange and the American Stock Exchange (AMEX). The AMEX is the only U.S. stock market to permit the … Continue reading