These are interest rate instruments, the two main categories of which are debt securities and bonds subject to circulation. Negotiable debt securities (TNCs) mainly include negotiable certificates issued by banks, commercial securities issued by non-financial corporations, and treasury bills. These securities, whose service life is usually less than 1 year, are traded not on the stock market, but by mutual agreement on the money market between financial intermediaries.
Bonds are debt securities issued by an enterprise, government agency or government that are characterized by an interest rate and repayment conditions determined at the time of issue. These securities are usually issued with a long maturity. There are several types of bonds, among which one can note:
– bonds with a fixed rate; – floating rate bonds whose coupon income is changed in accordance with the market index established by the issue agreement;
– OAT (treasury equivalent bonds) issued by the state;
– convertible bonds, which have the same characteristics as ordinary bonds, but also provide the holder with the opportunity to exchange security for a share on pre-agreed conditions. Thus, the price of a convertible bond not only reacts, like any bond, to changes in interest rates, but also, if applicable, to the underlying share.
Purchase property via market. Comments on risk: A bondholder who holds his securities until maturity receives a refund in accordance with the conditions established at the time of issue (usually at face value). If he trades them in the stock market before the maturity date, he is exposed to the risk of loss of capital in the event of an adverse change in the level of market rates.
The yield and security offered by these securities are based on various criteria, including: the level of rates in the capital market, the quality of the issuer’s signature, and the life of the security. The risk of non-return of these securities depends on the quality of the issuer. In the case of convertible bonds, a change in the price of the underlying asset entails additional market risk.
World marketing. A share is a title to property representing a portion of the capital of the company that issued it. This type of collateral gives the owner the right to participate in meetings of shareholders, receive information about the progress of the company and receive dividends. The share is not redeemable and therefore has no maturity date. The value of the shares changes in accordance with various parameters, the most famous of which are: the company’s future financial results, interest rates, economic situation, stock market context, etc.
Risk monitoring: The shareholder is associated with the development of the company, as well as its risks . Risk is limited by its contribution. Income from shares consists of dividends and any capital gains on the resale of shares. However, equity investments are always associated with the risk of not receiving dividends, such as losses from capital generation. Seeking quick profitability through short-term buying or speculative trading increases this risk.
Complex financial instruments The following complex products are considered to be:
– bonds and other debt securities that include a derivative instrument
– shares admitted to the unregulated market, or some sub-funds (private placement sub-fund);
– financial instruments giving the right to buy or sell another financial instrument,
– financial contracts formerly known as forward financial instruments,
– financial instruments that may entail actual or potential debt to the client,
– financial instruments with difficulties. negotiable instruments whose prices are not available to the general public and do not correspond to market prices are financial instruments that are the subject of confidential information and which are not clear to the average business client.
For example, among the derivatives of classic shares can be cited: warrants for shares are negotiable securities, which open the right of their holder to subscribe for new shares until a certain date (maturity) and at a fixed price (strike price). Subscription rights to shares are negotiable rights granted to old shares that entitle the holder to subscribe to new shares in the company. Warrants are exchange-traded securities that give the holder the right (but not the obligation) to purchase (demand a warrant) or sell (put a warrant) a main security, such as a share, change the price of a share, subject to pre-agreed conditions.