CH5 - OTHER FINANCIAL Flashcards
What 3 types of crypto token are there?
Exchange token (E.g. Bitcoin)
Security token (similar to investments)
Utility tokens (access to services and products)
What is a money market?
A market for cash where finance is provided short term 0-12 months.
How can retails investors access money markets?
Through collective investment schemes.
What is a treasury bill?
Instruments issued weekly by the DMO on behalf of the Treasury. These help cover the governments short term borrowing needs.
How does a zero-coupon instrument work?
You can buy at a discount to the nominal. For example, £100 to be redeemed in 3 months can be purchased at £97. Rather than paying £100 and receiving interest.
What is a CD?
Certificate of Deposit. Essentially a long term savings account. By locking your money away for say a year you can receive higher interest payments.
What are the key characteristics of property investment?
Each property is unique and value is subjective.
Illiquid, and can’t be partially liquidated.
Hard to diversify.
How is FX quoted?
base currency/ quote currency
base currency is always 1 - shows how much you can buy of quote currency.
eg usd/gbp - $1/£0.82
What is a spot transaction?
A transaction done at the immediate market price. (t+2)
What is a forward transaction?
Buyer and seller agree exchange rate and fixed sum of money for a future date.
What is a future?
A future is a standardized forward transaction, typically 3 months ahead.
What is a swap?
Two parties exchange currencies for a certain length of time and swap back at a later date. OTC
What is a forward exchange rate?
A future exchange rate calculated using the current spot rate and nominal interest rates.
What is the forward exchange rate calculation?
spot rate * (1 + quote rate/1 + base rate)
