CAPITAL MARKET INSTRUMENTS

Euro Convertible Bond Secured Premium Notes Deep Discount Bonds Warrants Tracking Stocks Disaster Bonds Derivatives

Euro Convertible Bond An unsecured security It offers the investors an option to convert the bond into equity at a fixed price after a minimum lock-in-period. Secured Premium Notes A share warrant which are only issued by the listed companies after having approval from the Central Government. SPN comes with a detachable warrants which has lock in period of 4 to 7 years. No interest will be paid within lock in period to SPN holders. SPN holders will get Principal Amount along with interest on installment basis after lock in period. Detachable warrants can be converted into Equity Shares as per notification & time limit by the Company.

Deep Discount Bonds Sells at a significant discount from par value. Has no coupon rate or lower coupon rate than the prevailing rates of fixed-income securities with a similar risk profile. Designed to meet the long term funds requirements of the issuer and investors. Can be sold with a long maturity of 25-30 yrs. Warrants Issued by a company, granting the buyer the right to purchase a number of shares of its equity share capital at a given exercise price during a given period.

Tracking Stocks
It is also known as "designer stock". Issued by a parent company to track the results of one of its subsidiaries or lines of business; without having claim on the assets of the division or the parent company.

Disaster Bonds
Also known as Catastrophe or CAT Bonds. High-yield debt instrument that is usually, Insurance linked and meant to raise money in case of a catastrophe. Special condition: if the issuer (insurance or Reinsurance Company) suffers a loss, the issuer's obligation to pay interest and/or repay the principal is either deferred or completely forgiven.

Derivatives
Financial instrument whose characteristics and value depend upon the characteristics and value of some underlying asset typically commodity, bond, equity, currency, index, event etc. Futures

Options Swaps

DIFFERENCE BETWEEN CAPITAL AND MONEY MARKET

S.NO. 1. 2. CAPITAL MARKET MONEY MARKET

The market dealing in long and medium term funds is known as capital market. It arranges large amount of funds. It makes funds available for investment in fixed assets. Funds may be used for 7-25 years on long term basis and 1-6 years on medium term basis. Limited scope or selected area Rate of interest is generally low

The market dealing in short term funds is known as money market. It arranges small amount of funds. It makes funds available for routine expenses or working capital.

3.

4. 5. 6. 7.

The use of funds is restricted to one year.

Widely distributed market Rate of interest is high

Instruments used are equity and preference shares, debentures, bonds, etc.

Instruments used are call money, treasury bills, commercial papers, certificate of deposit, etc.