_______________ are entities such as investment companies, commercial banks, insurance companies, pension funds and other financial institutions. In recent years the process of institutionalization of investors can be observed.

Investors are buying or selling financial instruments of financial intermediaries (financial institutions) which invest large pools of funds in the financial markets and hold portfolios. It relieves investors from making decisions about their portfolio.

It can be defined as the existing investment vehicles in the market available for investor and the places for transactions with these investment vehicles. Thus further in this subchapter the main types of investment vehicles and the types of financial markets will be presented and described.

It is a characteristic of financial assets that is not shared by physical assets, which usually have low liquidity. It reflects the feasibility of converting of the asset into cash quickly and without affecting its price significantly.

These are all those which have a maturity of one year or less. It is often are defined as money-market instruments, because they are traded in the money market which presents the financial market for short term (up to one year of maturity) marketable financial assets.

It is debt instrument issued by bank that indicates a specified sum of money has been deposited at the issuing depository institution. Certificate of deposit bears a maturity date and specified interest rate and can be issued in any denomination.

These are securities representing financial obligations of the government. Treasury bills have maturities of less than one year.

It is a name for short-term unsecured promissory notes issued by corporation. Commercial paper is a means of short-term borrowing by large corporations.

These are the vehicles created to facilitate commercial trade transactions. These vehicles are called bankers acceptances because a bank accepts the responsibility to repay a loan to the holder of the vehicle in case the debtor fails to perform.

It is often referred to as a repo, it is the sale of security with a commitment by the seller to buy the security back from the purchaser at a specified price at a designated future date.

These are those which return is fixed, up to some redemption date or indefinitely. The fixed amounts may be stated in money terms or indexed to some measure of the price level. This type of financial investments is presented by two different groups of securities.

It can be described as long-term debt instruments representing the issuer’s contractual obligation. Long term securities have maturity longer than 1 year. The buyer (investor) of these securities is landing money to the issuer, who undertake obligation periodically to pay interest on this loan and repay the principal at a stated maturity date.

These are equity security, which has infinitive life and pay dividends. But it is attributed to the type of fixed-income securities, because the dividend for preferred stock is fixed in amount and known in advance.

It is the other type of investment vehicles which is one of most popular among investors with long-term horizon of their investments. It represents the ownership interest of corporations or the equity of the stock holders.

Defined as investments with a high risk and high investment return. Using these investment vehicles speculators try to buy low and to sell high, their primary concern is with anticipating and profiting from the expected market fluctuations.

These are the derivative financial instruments. An options contract gives the owner of the contract the right, but not the obligation, to buy or to sell a financial asset at a specified price from or to another party.

These are the other type of derivatives. It is an agreement between two parties than they agree tom transact with the respect to some financial asset at a predetermined price at a specified future date. One party agree to buy the financial asset, the other agrees to sell the financial asset. It is very important, that in futures contract case both parties are obligated to perform and neither party charges the fee.

They receive money from investors with the common objective of pooling the funds and then investing them in securities according to a stated set of investment objectives.

_____________ have no pre-determined amount of stocks outstanding and they can buy back or issue new shares at any point. Price of the share is not determined by demand, but by an estimate of the current market value of the fund’s net assets per share (NAV) and a commission.

These are publicly traded investment companies that have issued a specified number of shares and can only issue additional shares through a new public issue.

These are in the business of assuming the risks of adverse events (such as fires, accidents, etc.) in exchange for a flow of insurance premiums. Insurance companies are investing the accumulated funds in securities (treasury bonds, corporate stocks and bonds), real estate.

These are an asset pools that accumulates over an employee’s working years and pays retirement benefits during the employee’s nonworking years.

These are unregulated private investment partnerships, limited to institutions and high-net-worth individuals, which seek to exploit various market opportunities and thereby to earn larger returns than are ordinarily available.

These are the other important component of investment environment. These are designed to allow corporations and governments to raise new funds and to allow investors to execute their buying and selling orders.

It is where corporate and government entities can raise capital and where the first transactions with the new issued securities are performed. If a company’s share is traded in the primary market for the first time this is referred to as an initial public offering (IPO).

It is where previously issued securities are traded among investors. Generally, individual investors do not have access to secondary markets. They use security brokers to act as intermediaries for them.

An ____________ provides the facility for the members to trade securities, and only exchange members may trade there. The members include brokerage firms, which offer their services to individual investors, charging commissions for executing trades on their behalf. Other exchange members by or sell

The _______________is not a formal exchange. It is organized network of brokers and dealers who negotiate sales of securities. There are no membership requirements and many brokers register as dealers here.

An ______________ is an electronic trading mechanism developed independently from the established market places – security exchanges – and designed to match buyers and sellers of securities on an agency basis.

The only short-term financial instruments are traded.

The only long-term financial instruments are traded. The capital markets allow firms, governments to finance spending in excess of their current incomes.

The ________________can be split into two fractions: domestic market and foreign market.

The ______________also is called the international market includes the securities which are issued at the same time to the investors in several countries and they are issued outside the jurisdiction of any single country (for example, offshore market).

It is the process of managing money or funds. It describes how an investor should go about making decisions.

It includes setting of investment objectives. The investment policy should have the specific objectives regarding the investment return requirement and risk tolerance of the investor.

The ______________ is the period of time for investments. Projected time horizon may be short, long or even indefinite.

It involves the analysis of market prices in an attempt to predict future price movements for the particular financial asset traded on the market.

It is the set of investment vehicles, formed by the investor seeking to realize its’ defined investment objectives. In the stage of portfolio formation the issues of selectivity, timing and diversification need to be addressed by the investor.

It involves forming the investor’s portfolio for decreasing or limiting risk of investment.

It is when several available financial assets are put to the portfolio at random.

When financial assets are selected to the portfolio following investment objectives and using appropriate techniques for analysis and evaluation of each financial asset.

This step of the investment management process concerns the periodic revision of the three previous stages. This is necessary, because over time investor with long-term investment horizon may change his / her investment objectives and this, in turn means that currently held investor’s portfolio may no longer be optimal and even contradict with the new settled investment objectives.

A _________ is the performance of predetermined set of assets, obtained for comparison purposes. The benchmark may be a popular index of appropriate assets – stock index, bond index.

____________ can be defined as a chance that the actual outcome from an investment will differ from the expected outcome. Obvious, that most investors are concerned that the actual outcome will be less than the expected outcome. The more variable the possible outcomes that can occur, the greater the risk.

_________ can be calculated as a potential deviation of each possible investment rate of return from the expected rate of return

_____________is estimated when the investor has enough information about the underlying probability distributions for the returns of two assets and can identify the actual probabilities of various pairs of the returns for two assets at the same time.