onomi    on epts and erminolo ies       22.39
        phillips curve                                          price-eArning rAtio
     A graphic curve depicting an empirical                  A concept used in the share market to equate
     observation of the relationship between the level       various stocks–is a ratio found/calculated by
     of unemployment and the rate of change of               dividing market price of a share by the earning
     money wages and, by inference, the rate of change       per share.
     of prices.
          It was in 1958 that an economist from New
                                                                primAry AnD seconDAry mArket
     Zealand, A. W. H. Phillips (1914–75) proposed           Primary market refers to buying of shares in an
     that there was a trade-off between inflation and        initial public offering. The shares are bought
     unemployment–the lower the unemployment                 by applying through a share application form.
     rate, the higher the inflation rate–governments         Secondary market refers to transactions where
     simply need to choose the right balance between         one investor buys shares from another investor at
     the two evils.                                          the prevailing market price or at an agreed price.
                                                             The shares are bought and sold in the secondary
        piggybAck loAn                                       market on the stock exchanges. The investors may
                                                             buy and sell securities on the stock exchanges
     A term associated with mortgage business got            through stock brokers.
     popular in the wake of the US subprime crisis
     mid-2007. Piggyback loan is a second mortgage              primAry DeAler
     enabling a borrower to buy a house with little or
                                                             Primary dealer (PD) is an intermediary
     no equity.                                              participating in the primary auctions of the
                                                             government securities (i.e., G-See or the Gilt-
        pigou effect                                         edge securities or the Gilt) and the Treasury Bills
     Named after Arthur Cecil Pigou (1877–1959),             (TBs); through a PD these instruments reach the
                                                             secondary market.
     a sort of wealth effect resulting from deflation/
     disinflation (i.e., price fall) – a fall in price level      Primary dealers are allowed participation in
     increases the real value of people’s money, making      the call money market and notice money market.
                                                             They get liquidity support from RBI via repos or
     them wealthier inducing increased spending by
                                                             refinance (against the G-Secs.).
     them; higher demand creation leads to higher
                                                                prisoner’s DilemmA
        preference shAres                                    A popular example in game theory which concludes
                                                             why co-operation is difficult to achieve even if it
     The shares which bear a stated dividend and carry a     is mutually beneficial, ultimately making things
     priority over equity shares (in matters of dividend     worse for the parties involved. It is shown giving
     and assets) are also known as hybrid securities         an example of two prisoners arrested for the same
     (since they have the qualities of equity shares as      offence held in different cells. Each prisoner has
     well as bond). Such shares in India cannot have a       two options, i.e., confess, or say nothing. In this
     life over 10 years.                                     situation there are three possible outcomes: