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Financial instruments are monetary contracts between parties. They can be created, traded, modified and settled. They can be cash (currency), evidence of an ownership, interest in an entity or a contractual right to receive or deliver in the form of currency (forex); debt (bonds, loans); equity (); or derivatives (options, futures, forwards).
According to ISDA, cash represents around 82% of collateral received and 83% of collateral delivered in 2009, which is broadly consistent with last year’s results. Government securities constitute fewer than 10% of collateral received and 14% of collateral delivered this year, again consistent with end-2008. [8]
Common underlying assets held may include mortgage-backed securities, commercial real estate bonds and corporate loans. The SPE issues bonds to investors in exchange for cash, which are used to purchase the portfolio of underlying assets. Like other ABS private label securities, the bonds are not uniform but issued in layers called tranches ...
Securitization is the financial practice of pooling various types of contractual debt such as residential mortgages, commercial mortgages, auto loans or credit card debt obligations (or other non-debt assets which generate receivables) and selling their related cash flows to third party investors as securities, which may be described as bonds, pass-through securities, or collateralized debt ...
Investment in residential real estate is the most common form of real estate investment measured by number of participants because it includes property purchased as a primary residence. In many cases the buyer does not have the full purchase price for a property and must borrow additional money from a bank, finance company or private lender.
A mortgage bond is a bond backed by a pool of mortgages on a real estate asset such as a house. More generally, bonds which are secured by the pledge of specific assets are called mortgage bonds. Mortgage bonds can pay interest in either monthly, quarterly or semiannual periods. The prevalence of mortgage bonds is commonly credited to Mike Vranos.
The principal argument for investors to hold U.S. government bonds is that the bonds are exempt from state and local taxes. The bonds are sold through an auction system by the government. The bonds are buying and selling on the secondary market, the financial market in which financial instruments such as stock, bond, option and futures are traded.
An investment normally counts as a cash equivalent when it has a short maturity period of 90 days or less, and can be included in the cash and cash equivalents balance from the date of acquisition when it carries an insignificant risk of changes in the asset value. If it has a maturity of more than 90 days, it is not considered a cash equivalent.