Options and Corporate Finance: Basic Concepts

May 28th, 2015
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What Does Securitization Mean? The process through which an issuer creates a financial instrument by combining other financial assets and then marketing different tiers of the repackaged instruments to investors. The process can encompass any type of financial asset and promotes liquidity in the marketplace.

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What Does Clearing House Mean?An agency or separate corporation of a futures exchange responsible for settling trading accounts, clearing trades, collecting and maintaining margin monies, regulating delivery and reporting trading data. Clearing houses act as third parties to all futures and options contracts -as a buyer to every clearing member seller and a seller to every clearing member buyer. Each futures exchange has its own clearing house. All members of an exchange are required to clear their trades through the clearing house at the end of each trading session and to deposit with the clearing house a sum of money (based on clearinghouse margin requirements) sufficient to cover the member's debit balance. For example, if a member broker reports to the clearing house at the end of the day total purchase of 100,000 bushels of May wheat and total sales of 50,000 bushels of May wheat, he would be net long 50,000 bushels of May wheat. Assuming that this is the broker's only position in futures and that the clearing house margin is six cents per bushel, this would mean the broker would be required to have $3,000 on deposit with the clearing house. Because all members are required to clear their trades through the clearing house and must maintain sufficient funds to cover their debit balances, the clearing house is responsible to all members for the fulfillment of the contracts. What Does Alternative Trading System - ATS Mean?A trading system that is not regulated a

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