Three main asset classes:

  1. Bonds
  2. stocks
  3. cash equivalents


A security is a tradable asset of any kind. Securities are broadly categorized into:

  1. debt securities (such as banknotes, bonds);
  2. equity securities, e.g., common stocks;
  3. derivative contracts, such as forwards, futures, options and swaps.


Bonds ---generally--> fixed-income securities

main categories of Bonds:

  1. corporate bonds
  2. municipal bonds
  3. Treasury
    1. notes – tax
    2. bills – short term
    3. bonds – long term

securities type

  1. Equities: also known as shares or stock
    1. common: called ordinary shares in UK
    2. preferred: no voting right & less appreciation
  2. Debt securities: also known as fixed-income securities
    1. corporate bonds
    2. municipal bonds
    3. government bonds
      1. notes – tax
      2. bills – short term
      3. bonds – long term
    4. collateralized
      1. CDO
      2. CMO
      3. GNMA
    5. zero-coupon securities
    6. preferred stock: same as 1.2
  3. derivatives
    1. future
      1. Stock Index Futures:
    2. options: are exchange instruments and are not issued by the company, measured in months
      1. stock index options
        1. Options on Physicals result in the receipt or delivery of the underlying index
        2. Futures Options: combination of the profit potential of a futures contract and the limited risk characteristics of an option
    3. convertibles
      1. convertible bonds
      2. convertible preferred stock: could exercise immediately
    4. warrant: issued and guaranteed by the company, right to deal with common stock, often attached to preferred stock, often measured in years
      1. put warrant: sell
      2. call warrant: buy
    5. equity swap
    6. Equity-linked Securities
    7. Contracts for Difference: a zero coupon bond embedded with a call option on a stock index


24 June 2014