Chapter 2: Financial Markets and Institutions Flashcards
How is capital being transferred from savers to borrowers?
1) Direct transfers
2) Investment banks
3) Financial Institutions
What are the different types of market?
1) Physical asset markets or financial markets
2) Spot markets or Futures markets
3) Market moneys or Capital markets
4) Primary markets or Secondary markets
5) Private markets or public markets
What are physical asset markets?
Tangible products which are dealt. E.g. Real estate, wheat, gold.
What are financial asset markets?
Non-tangible products which are dealt. Stocks, bonds, derivatives.
What are spot markets?
Assets dealt on the spot.
What are future markets?
Assets are dealt at a fixed time and price in the future.
What are money markets?
Assets are dealt within a short duration of time. Less than a year. Highly liquid debt securities.
What are capital markets?
Assets are dealt in a long period of time. More than a year.
What are primary markets?
A mean by a corporation to raise capital by selling new securities.
What are secondary markets?
Securities which are traded between investors after being issued by corporations.
What are private markets?
When two parties agree upon a security dealing. E.g bank loans, private debt placements.
What are public markets?
Standardized contracts in organised exchanges.
What are investment banks?
Help businesses to design and promote securities so as to make attractive to investors. These investment banks serve as underwriters.
What are commercial banks?
More traditional businesses, appealing to a big variety of investors. Historically, dealing with checking accounts.
What are financial Services Corporation?
A corporation which controls a number of different financial services, each with its own purpose. Example, investment banking, brokerage operations, insurance and commercial banking.
What are credit unions?
Associations which a group of investors make dealings with each other. Make loans.
What are pension funds?
Retirement plans funded by corporations/government agencies to trust departments of commercial banks or life insurance companies.
Bonds, stocks, mortgages, real estates.
What are life insurance companies?
Take in a yearly premium from investors to invest in stocks, bonds, real estates, mortgages.
Payments to beneficiaries of insured.
What are mutual funds?
Pool in money from investors and invest in a variety of financial instruments so as to reduce risk through diversification.
What are hedge funds?
- Modified mutual fund
- For hedge against risk or speculation
- Not regulated much
- Large institutional investors
What are exchange traded funds?
- Purchases portfolio of stocks
- Sells it’s own shares
- Provides huge exposure, low risk
What are private equity companies?
- Pool funds from investors
- Not passive investing, takes over management of company, buyout
What are physical location exchanges?
- Tangible location exchanges
- Conducts auction market
- Listed Securities
What are over-the-counter exchanges?
- Brokers and dealers
- Connected electronically
- Non listed securities
What are dealer markets?
- Conducts security trading
- Not done on location
