Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Financial Service Sector > Investment Chain > Flashcards

Investment Chain Flashcards

1
Q

What are the three core functions of the financial services sector?

A
  1. The investment Chain
  2. Risk
  3. Payment Systems
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Investment chain

A

Through the investment chain, savers and borrowers are brought together. Savers provide financing to businesses, and businesses that wish to grow offer opportunities for savers to take part in the growth and resulting potential returns. The efficiency of this chain is critical to allocating what would otherwise be uninvested capital to businesses that can use it to grow their enterprises, as well as the savings pools of the investors. This chain, therefore, raises productivity and, in turn, improves the competitiveness of those financial markets within the global economy.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Risk

A

In addition to the opportunities that the investment chain provides for pooling investment risks, the 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. These tools help businesses cope with global uncertainties as diverse as the changing value of currencies, the incidence of major accidents or extreme weather conditions. They also help households protect themselves against everyday contingencies.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Payment System

A

Payment and banking services operated by the financial services sector provide the practical mechanisms for money to be managed, transmitted and received quickly and reliably. It is an essential requirement for commercial activities to take place and for participation in international trade and investment. Access to payment systems and banking services is a vital component of financial inclusion for individuals.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What are the five areas of competitiveness?

A
  1. Business environment.
  2. Human capital.
  3. Infrastructure.
  4. Financial sector development.
  5. Reputation.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Who evaluates the rankings and future competitiveness of 111 major financial centres ?

A

The Global Financial Centres Index is produced BY Z/Yen

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Which are the top Five Global Financial Centres

A
  1. New York
  2. London
  3. Hong Kong
  4. Shanghai
  5. Los Angeles
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What are the two distinct areas of the financial sector?

A
  1. The wholesale sector/ Institutional
  2. Retail Sector
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Which activities take place in the wholesale/institutional sector?

A
  1. Equity markets – the trading of quoted shares.
  2. Bond markets – the trading of government, supranational or corporate debt.
  3. Foreign exchange – the trading of currencies.
  4. Derivatives – the trading of options, swaps, futures and forwards.
  5. Insurance markets – major corporate insurance (including professional indemnity), reinsurance, captive insurance and risk-sharing insurance.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Mention other activities that take place in the wholesale/institutional sector:

A
  1. Fund management – managing the investment portfolios of collective investment schemes (CISs), pension funds and insurance funds
  2. Investment banking – banking services tailored to organisations, such as undertaking mergers and acquisitions (M&A), equity trading, fixed-income trading and private equity, and
  3. Custodian banking – provision of services to asset managers involving the safekeeping of assets, the administration of the underlying investments, settlement, corporate actions and other specialised activities.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What activities take place in the Retail Sector?

A
  1. Retail banking – the traditional range of current accounts, deposit accounts, lending and credit cards.
  2. Insurance – the provision of a range of life assurance and protection solutions for areas such as medical insurance, critical illness cover, motor insurance, property insurance, income protection and mortgage protection.
  3. Pensions – the provision of investment accounts specifically designed to capture savings during a person’s working life and provide benefits on retirement.
  4. Investment services – a range of investment products and vehicles ranging from execution-only stockbroking to full wealth management services and private banking.
  5. Financial planning and financial advice – helping individuals to understand and plan for their financial future.”
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What are equity markets?

A

Equity markets is the name given to stock markets where the ordinary and preferred shares of companies, such as Amazon, Apple, Facebook and Netflix, are traded. Equity markets are the best-known of the financial markets and facilitate the trading of shares in quoted or listed companies.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is Market Capitalisation?

A

Total market value of a company’s shares

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What was the global market capitalisation at the end of 2022?

A

US $100 Trillion

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What was the largest exchange in the world ?

A

The New York Stock Exchange (NYSE) with a domestic market of over US $24 trillion.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What was the second largest exchange in the world?

A

Nasdaq with a domestic market capitalisation of around US$16 trillion.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What are MTFs?

A

MTFs are systems that bring together multiple parties that are interested in buying and selling financial instruments including shares, bonds and derivatives. These systems are also known as crossing networks or matching engines that are operated by an investment firm or another market operator.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What are Bond Markets?

A

Bond markets allow governments and companies to raise loans or debt finance directly from investors and then facilitate the subsequent secondary trading of the debt securities created.

19
Q

What are FX markets?

A

Foreign exchange (FX) markets are the global marketplace that determine the exchange rates for currencies around the world, and where one currency is traded for another

20
Q

What are derivative markets ?

A

Derivatives markets trade a range of complex products based on underlying instruments, including currencies, indices, interest rates, equities, commodities and credit risk. Futures and options are two of the most well-known derivatives.

21
Q

What are insurance markets?

A

Insurance markets specialise in the management of personaI risk, corporate risk and protection of life events.

22
Q

What are the largest insurance markets ?

A
  1. US
  2. China
  3. Japan
  4. UK
  5. France
23
Q

What are Investment Banks?

A

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. They also provide services for institutional firms that might want to invest in shares and bonds, in particular pension funds and asset managers.

24
Q

Which services are provided by Investment Banks?

A
  1. Finance-raising and advisory work.
  2. Securities-trading
  3. Treasury
  4. Investment Management
25
Q

What is a custodian bank?

A

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

26
Q

Which activities do custodian banks undertake?

A
  1. Holding assets in safekeeping, such as equities and bonds.
  2. Arranging settlement of any purchases and sales of securities.
  3. Asset servicing – collecting income from assets, namely dividends in the case of equities and interest in the case of bonds, and processing corporate actions.
  4. Providing information on the underlying companies and their annual general meetings (AGMs).
  5. Managing cash transactions.
  6. Performing FX transactions when required.
  7. Providing regular reporting on all activities undertaken that affect the holdings in a portfolio, including all trades, corporate actions and other transactions.
27
Q

What are retail commercial banks?

A

They are the financial institutions that provide services, such as taking deposits from, and lending funds to, retail customers, as well as providing payment and money transmission services. They may also provide similar services to business customers

28
Q

What are saving institutions?

A

As well as retail banks, most countries also have savings institutions that started off by specialising in offering savings products to retail customers, but now tend to offer a similar range of services to those offered by banks.

29
Q

What Is P2P?

A

In the traditional banking model, banks take in deposits on which they pay interest and then lend out at a higher rate; the spread between the two is where they earn their profit. Peer-to-peer (P2P) lending 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.

30
Q

What is Crowdfunding?

A

Crowdfunding is the practice of funding a project or venture by raising small amounts of money from a large number of people. Traditionally, financing a business, project or venture involved asking a bank or a few people for large sums of money. Crowdfunding switches this idea around, using the internet to access many potential funders.

31
Q

Which forms can crowdfunding take?

A
  1. A donation
  2. Debt Crowdfunding
  3. Equity Crowdfunding
32
Q

What is a fund manager?

A

Firm that invests money on behalf of customers.

33
Q

Which are the main services offered by stockbrokers?

A
  1. Execution-only stockbrokers
  2. Robo advisers
  3. Advisory and discretionary wealth managers
  4. Institutional Brokers
34
Q

Execution- only stockbrokers

A

These offer telephone or internet-based trade execution and settlement for retail clients. No advice is offered and commission is charged per trade. They are aimed at day traders and investors who are confident in making their own investment decisions and, typically, investors with small portfolios.

35
Q

Robo Advisers

A

A robo-adviser is an online wealth management service that provides automated, algorithm-based portfolio management advice without the use of human financial planners. The robo-adviser typically charges a monthly or annual fee based on the size of the portfolio (amount of assets under management).

36
Q

Advisory and discretionary wealth managers

A

These offer a wealth management service to private investors – either advice only or a fully managed (discretionary) service. Their target market ranges from mass affluent to high net worth clients with large portfolios and they charge fees for management of the portfolio based on the value of the portfolio.

37
Q

Institutional Brokers

A

These are stockbrokers who arrange trades on behalf of large institutions. Their skill lies in their ability to execute what are typically large trades in the market, without having a significant adverse effect on the share price. This may involve breaking up a large order into smaller trades and executing them through a variety of different trading venues so as to minimise their impact on the market. Institutional brokers usually charge basis point fees per trade.

38
Q

Platforms

A

Platforms, sometimes known as fund supermarkets, are online services used by intermediaries, such as independent financial advisers (IFAs), to view and administer their clients’ investment portfolios.

39
Q

Private Banks

A

Private banks provide a wide range of services for their clients, including wealth management, estate planning, tax planning, insurance, lending and lines of credit. Their services are normally targeted at clients with a certain minimum sum of investable cash, or minimum net worth. These clients are generally referred to as high net worth individuals (HNWIs).

40
Q

Sovereign Wealth Funds

A

A sovereign wealth fund (SWF) is a state-owned investment fund that holds financial assets such as equities, bonds, real estate, or other financial instruments. Examples of SWFs include the Norway Government Pension Fund, Abu Dhabi Investment Authority, SAMA Foreign Holdings of Saudi Arabia and China Investment Corporation.

41
Q

What are the key characteristics of SWFs?

A
  1. They hold, manage, or administer assets to achieve financial objectives.
  2. They employ a set of investment strategies which include investing in foreign financial assets.
  3. The assets of an SWF are commonly established out of balance of payments surpluses, official foreign currency operations, the proceeds of privatisations, fiscal surpluses, and receipts resulting from commodity exports.
42
Q

Industry Trade and Professional Bodies

A
43
Q

Third Party Administrators TPAs

A

Third-party administrators (TPAs) undertake investment administration on behalf of other firms, and specialise in this area of the investment industry.

Financial Service Sector (10 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions