Definitions Essay Example | Topics and Well Written Essays - 500 words

Definitions - Essay Example Financial System - system that enables transfer of money between savers or investors/lenders and borrowers and may also pertain to the set of implemented procedures that track the financial activities of the company. Diversification - a risk management technique that mixes a wide variety of investments within a portfolio and strives to smooth out unsystematic risk events in a portfolio so that the positive performance of some investments will neutralize the negative performance of others. Repurchase Agreement - (repo for short) is a type of short-term loan much used in the money markets, whereby the seller of a security agrees to buy it back at a specified price and time; the seller pays an interest rate, called the repo rate, when buying back the securities. US Treasury Security - government debt  issued by the  United States Department of the Treasury  through the  Bureau of the Public Debt; treasury  securities  are the  debt  financing instruments of the  United States federal government, and they are often referred to simply as  Ã¢â‚¬Å"Treasuries.† OTC Markets - decentralized (Over-The-Counter) markets of securities not listed on an exchange where market participants trade over the telephone, facsimile or electronic network instead of a physical trading floor. Adverse Selection - also called anti-selection or negative selection refers to a market process in which â€Å"bad† results occur when buyers and sellers have  asymmetric information  (i.e. access to different information): the â€Å"bad† products or services are more likely to be selected. Moral Hazard - The risk that a party to a transaction has not entered into  the contract in good faith, has provided misleading information about its assets, liabilities or credit capacity, or has an incentive to take unusual risks in a desperate attempt to earn a profit before the contract settles. Money - a medium that can be