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Investment & Portfolio > Chapter 1 > Flashcards

Chapter 1 Flashcards

1
Q

provides the link between organizations needing capital and those with capital available for investment.

A

Financial Services Sector

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2
Q

channels money invested to those organizations that need it, and provides execution, payment, advisory, and management services.

A

Financial Services Sectors

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3
Q

3 Core Functions of Financial Services Sector

A

Investment Chain
Risk
Payment Sytems

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4
Q

savers and borrowers are brought together.

A

The investment chain

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5
Q

financial services sector allows other risks to be managed effectively and efficiently through the use of insurance and increasingly through the use of sophisticated derivatives.

A

Risk

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6
Q

provide the practical mechanisms for money to be managed, transmitted and received quickly and reliably.

A

Payment systems

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7
Q

Financial Markets (5)

A

Equity Markets
Bond Markets
Foreign Exchange Markets
Derivatives Markets
Insurance Markets

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8
Q

are the best known of the financial markets and facilitate the trading of shares in quoted companies.

A

Equity Markets

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9
Q

Rivals to traditional stock exchanges have also arisen with the development of technology and communication networks known as …

A

Multilateral Trading Facilities (MTFs)

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10
Q

are larger both in size and value trading

A

Bond markets

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11
Q

are the largest of all financial markets, with average daily turnover in excess of 5 trillion US Dollar

A

Foreign Exchange Markets

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12
Q

The strength of one currency in relation to another and the rate at which one currency is exchanged for another is set by …

A

Supply and demand

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13
Q

an over-the-counter (OTC) market, meaning one where brokers/dealers negotiate directly with one another, there is no central exchange or clearing house.

A

FOREX

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14
Q

releases figures on the composition of the Forex market every three years

A

Banks for International Settlements (BIS)

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15
Q

trade a range of complex products based on underlying instruments, including currencies, indices, interest rates, equities, commodities and credit risk.

A

Derivative Markets

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16
Q

largest of the exchange –traded derivatives markets

A

Chicago Mercantile Exchange (CME)

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17
Q

dominates trading in the OTC derivatives markets worldwide

A

Europe

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18
Q

account for the majority of outstanding derivatives contracts, mostly through interest rate swaps.

A

Interest rate derivatives contract

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19
Q

The next largest segment is.., which are used to speculate on currency movements and to hedge the risks of currency positions.

A

Forex derivatives

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20
Q

specialize in the management of personal risk, corporate risk and protection of life events

A

Insurance markets

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21
Q

Largest insurance markets

A

US, Japan, China, UK

22
Q

Participants (13)

A

1 Investment Banks
2 Custodian Banks
3 Retail Commercial Banks
4 Savings Institutions
5 Peer-to-peer (P2P) or Crowd Funding
6 Insurance Companies
7 Investment Schemes
8 Fund Managers
9 Stockbrokers and Managers
10 Private Banks
11 Sovereign Wealth Funds (SWFs)
12 Trade Bodies
13 Third-party Administrators (TPAs)

23
Q

provide advice and arrange finance for companies that want to float on the stock market, raise additional finance by issuing further shares or bonds, or carry out mergers and acquisitions.

A

Investment banks

24
Q

are banks that specialize in safe custody services, looking after portfolios of shares and bonds on behalf of others, such as fund managers, pension funds and insurance companies.

A

Custodians

25
Q

have driven down the charges that a custodian can make for its traditional custody services and have resulted in consolidation within the industry.

A

Cost presssures

26
Q

is now dominated by a small number of global custodians who are often divisions of major banks.

A

Custody buisness

27
Q

Among the biggest global custodians

A

Bank of Melon New York and State Street

28
Q

provide services such as taking deposits from, and lending funds to retail customers, as well as providing payment and money transmission services.

A

Retail/commercial bank

29
Q

started off by specializing in offering savings products to retail customers, but now tend to offer a similar range of services to those offered by banks.

A

Savings institutions

30
Q

are often described as mutual societies or mutual savings banks.

A

Savings organization

31
Q

cuts out the banks so that borrowers often receive slightly lower rates, while savers get far improved headline rates, with the P2P firms themselves profiting via a fee.

A

Peer-to-peer Lending

32
Q

collect premiums in exchange for the coverage provided

A

Insurance companies

33
Q

provides solutions for much more than the standard areas, such as life cover and general insurance cover

A

Insurance industry

34
Q

is a key area of financial advice, and the insurance industry provides a variety of products to meet many potential scenarios.

A

Protection planning

35
Q

are one of the key methods by which individuals can make provision for their retirement needs. There are a variety of retirement schemes available, ranging from ones provided by employers, to self-directed schemes.

A

Retirement scheme or pension scheme

36
Q

also known as investment managers, portfolio managers or asset managers, run portfolios of investments for others

A

Fund managers

37
Q

will buy and sell shares, bonds and other assets in order to increase the value of their clients’ portfolios

A

Investment managers

38
Q

work on behalf of institutions, for example, investing money for a company’s pension fund or an insurance company’s fund, or managing the investments of a mutual fund

A

Institutional fund managers

39
Q

invest the money of relatively wealthy individuals

A

Private client managers

40
Q

arrange stock market trades on behalf of their clients, who are investment institutions, fund managers or private investors.

A

Stockbrokers

41
Q

Stockbrokers can be divided into four main categories:

A

Execution-only stockbrokers
Robo-advisers
Advisory and Discretionary managers
Institutional brokers

42
Q

these offer telephone or internet-based trade execution and settlement for retail clients.

A

Execution-only stockbrokers

43
Q

a recent innovation, a robo-advisor is an online wealth management service that provides automated, algorithm-based portfolio management advice without the use of human financial planners.

A

Robo-advisers

44
Q

these offer a wealth management service to private investors- either advice only or a fully managed (discretionary) service.

A

Advisory and discretionary wealth managers

45
Q

these are brokers who arrange trades on behalf of large institutions.

A

Institutional brokers

46
Q

a wide range of services for their clients, including wealth management, estate planning, tax planning, insurance, lending and lines of credit

A

Private banks

47
Q

is offered both by domestic banks and by those operating offshore

A

Private banking

48
Q

is a state-owned investment fund that holds financial assets such as equities, bonds, real estate, or other financial instruments.

A

Sovereign wealth funds

49
Q

undertake investment administration on behalf of other firms, and specialize in this area of the investment industry.

A

Third-party adminstrators (TPAs)

50
Q

The investment industry is a dynamic, rapidly changing business, and one that requires co-operation between firms to ensure that the views of various industry sections are represented

A

Trade Bodies

51
Q

Heirarchy of Financial Needs

A

Estate Planning
Investment
Protection
Savings
Basic Income

Investment & Portfolio (2 decks)

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