Default the risk that the bond issuer fails to make

• Default : the risk that
the bond issuer fails to make payments as specified by the bond contract.• Loan-backed securities : assets created by pooling individual loans and selling
shares in that pool.• Financial intermediary : an institution, such as a mutual fund, pension fund, life insurance company , or bank , that transforms the funds
it gathers from many individuals into financial assets .• Mutual fund : a financial intermediary that creates a stock portfolio by buying and holding shares in
companies and then selling shares of this portfolio to individual investors.• Pension fund : a type of mutual fund that holds assets in order to provide
retirement income to its members. • Life insurance company : a financial intermediary that sells policies guaranteeing a payment to a policyholder’s
beneficiaries when the policyholder dies.• Bank deposit : a claim on a bank that obliges the bank to give the depositor his or her cash when demanded.
• Bank : a financial intermediary that provides liquid assets in the form of bank deposits to lenders and uses those funds to finance the illiquid investments
or investment spending needs of borrowers.• Efficient markets hypothesis : a principle of asset price determination that holds that asset prices embody all
publicly available information. The hypothesis implies that stock prices should be unpredictable, or follow a random walk , since changes should occur
only in response to new information about fundamentals.• Random walk : the movement over time of an unpredictable variable .