Intro to financial markets Flashcards
Other terms for bond markets
Credit markets
Fixed income markets
Yield curve
A line that plots the interest rates of bonds with differing maturity dates
Normal yield curve
The longer maturity bonds have a higher yield than shorter term bonds
Inverted yield curve
Shorter term yields are higher than long term yields
When are subverted yield curves used?
When an economic recession is expected
Flat yield curve
When short and long term yields are the same
Sell side institutions
Investment banks and commercial banks
Stock brokers and market makers
Functions
Promotion and sale of financial institutions
Buy side institutions
Asset managers/ pension funds
Hedge funds, private equity funds
Proprietary traders and retail investors
FCA
Financial conduct authority
They protect consumers and regulate financial services. FCA is accountable to UK parliament
SEC
Securities and exchange commission
It is an independent government agency which protects investors. Maintains fair and orderly functioning of financial markets.
Hit rate
The percentage of total trades which are profitable
Reward to risk ratio
RRR is the ratio of target profit to initial risk.
Which trades tends to have a low hit rate and high RRR?
Trend following
Which trades tend to have a high hit rate and low RRR?
Morning straddles
