Chapter 1 Flashcards
What are ETDs?
Exchange Traded Derivatives - Futures and Options.
What is the typical term for a Credit Default Swap
5 years. Although CDS’s of almost any maturity can be traded
What is demutualisation?
The process by which Building Society’s which were previously mutual associations (owned by members) could become companies and banks.
Name 5 services of retail banks. What additional services do larger retail banks offer their customers?
- Taking deposits from retail customers
- Lending funds to retail customers
- Providing payment services
- Providing money transmission services 5. Providing internet and telephone banking
Larger retail banks may offer:
- Investments 2. Pensions
- Insurance
What services do building societies offer?
deposit accounts and mortgages.
Name 5 services provided by investment banks
- Corporate finance and advisory services normally for Initial Public Offerings - to raise finance and also handle takeovers and mergers
- Banking for governments, institutions and companies
- Treasury dealing for corporate clients in foreign currencies
- Investment management for sizeable investors, e.g.
Pension funds - Securities trading
What instruments do pension funds invest in?
Pension funds are large, long term investors in shares, bonds and cash. Some also invest in physical assets, e.g. property. Some are allowed to use derivatives to hedge their other assets against market risk.
What products do insurance companies offer?
Insurance company products range from life insurance and general insurance cover, to payment protection policies, and fleet insurance.
What types of organisations do fund managers act for?
Fund managers administer portfolios for pension funds, insurance companies and collective investment schemes.
Fund managers offer private wealth management and the provision of investment management services to institutions such as companies, charities, trusts and local governments. Other areas of business include hedge funds. Fund managers also offer services to wealthier individuals.
What are hedge funds?
Hedge funds are aggressively managed portfolios of investments that use advanced investment strategies such as leveraged portfolios, long, short and derivative positions in both domestic and international markets with the goal of generating high returns.
Which organisations do institutional fund managers provide services for?
Institutional fund managers invest money for institutions, e.g. a company’s pension fund, or an insurance company’s fund or managing the investments in a unit trust.
How do Private Client fund managers charge individual investors?
Fund managers charge their clients for managing their money; often based on a small percentage of the fund, and sometimes on the performance of the portfolio.
Describe the services offered by a stockbroker?
Stockbrokers arrange stock market trades on behalf of mainly private clients. They may offer advice or alternatively offer execution only services. They can be independent companies but usually are divisions of much larger entities. They earn fees for advice and commissions on transactions.
What are custodians?
Custodians are banks that specialise in safe custody services, looking after portfolios on behalf of fund managers, pension funds and insurance companies.
What are the core activities of a custodian?
- Holding assets in safekeeping
- Arranging settlement of purchases and sales of securities
- Collecting income from assets (dividends on equities and
interest on bonds) - Providing information about underlying companies and their
AGMs - Performing foreign exchange transactions
- Managing cash transactions
- Providing regular reporting on all of their activities to clients
- Managing stock-lending
