Notes 1
How Federal Funds Rate works
sequenceDiagram
participant FOMC;
participant commercial bank;
participant market;
FOMC->>commercial bank: increase Federal Funds Rate;
commercial bank->>market: more cash flow;
loop
market->>market: boost activities
end
Note right of market: ideally
Bank reserves 銀行儲備
- Minimum amounts of cash that banks are required to keep on hand regulated by Central bank in case of unexpected demand. Reverse rate (reverse vs deposit) has been set at 0 to 10%.
- Central can use reverse levels as a weapon in monetary policy. Lower requirement to facilitate economic activity. Or demand to increase to slow down growth by fund rate.
- Federal Reserve 聯邦儲備 and central banks can also use quantitative easing in order to control the reserve.
Government Bond
- Treasury bills (T-bills) less than 1 yr.
- Treasury notes (T-notes) 1-10 yrs.
- Treasury bonds (T-bonds) more than 10 yrs.
- These fixed income securities help government to get funds from consumers and investors. It is based on full faith and credit of the government. Investors can expect a high degree of safety and a steady but unspectacular profit from this. Upon maturity, these will return their face value.
Security
graph LR;
A[equity = stock 股票] --> B[security 証券];
C[bond 債券] --> D[debt];
D --> B;
C --> E[government];
C --> F[corporate];
D --> G[hybrid];
A --> G;
G --> B;
G --> H[equity warrants];
H --> I[like startups];
G --> J[convertible bonds];
- An initial public offering (IPO) represents a company's first major sale of equity securities to the public. This is one of the methods in primary market, full of venture capitalists / angel investors.
- Secondary market: aftermarket, securities are simply transferred as assets from one investor to another.
- Public offer and sale of securities are regulated by US Securities and Exchange Commission (SEC) 証券交易委員會.
- Self Regulatory Organizations (SROs)自我監管協會 within brokerage industry often take on regulatory positions as well.
Definition of a security offering
- Existence of an investment contract
- Formation of a common enterprise
- A promise of profits by the issuer
- Use of a 3rd party to promote the offering
References