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CWM Financial Markets > Last minute stuff > Flashcards

Last minute stuff Flashcards

1
Q

What are most corporate bonds issued as?

A

Debentures

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2
Q

What are debentures?

A

IOUs from the company

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3
Q

What sets out whether a charge is fixed or floating?

A

The deeb of debenture

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4
Q

What is a charge?

A

Collateral using an asset

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5
Q

What is a fixed charge

A

A charge over a defineable asset

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6
Q

What can’t a lender do to the fixed asset?

A

Cannot sell it (release it from its charge) without lender permission

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7
Q

How can a lender sell a fixed asset?

A

Offering to replace the charge with an equal or better asset

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8
Q

What can a lender do if the borrower defaults? (fixed charge)

A

1) Appoint a receiver and generate income
2) Take control and sell it

any excess from sale must be returned to company.

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9
Q

What is a floating charge

A

an equitable charge on the companies assets - present and future

Company can still use assets whlist under charge

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10
Q

Why is a floating charge useful?

A

can borrow without having to pledge specific securities (and be prevented from disposing of them)

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11
Q

What happens to a floating charge if the borrower defaults?

A

Fixes on their assets at that point

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12
Q

What ranks higher in liquidation? Fixed or floating charge

A

Fixed

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13
Q

What are the requirements for a main market LSE listing? (5)

A

1) £30m min market cap - 10% free float
2) £200k minimum bonds (if in issue)
3) Freely transferable securities
4) Statement of going concern
5) 3yr Trading History

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14
Q

What are the requirements for an AIM LSE listing?

A

1) Appoint a NOMAD
2) Appoint a nominated broker
3) Disclose price sensitive information to market
4) Publish annual and interim accounts within time frames
5) Disclose notifiable interest within 2 working days

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15
Q

What is a notifiable interest?

A

> 3% of a companies voting rights owned

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16
Q

Give 4 examples of types of dual listing

A

1) UK and US (Vodafone)
2) HK and UK (and US ADR) - HSBC
3) A Shares & H Shares in China
4) NYSE & Regional Exchange

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16
Q

Benefit of dual listing?

Why might this not be the case?

A

1) Improved liquidity

Most dual issues primarily trade on one market

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16
Q

What applies to companies dual listing in the US?

A

Sarbanes-Oxley (SOX)

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16
Q

What does SOX aim to do?

A

Protect consumers by improving the standard of corproate disclosures

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17
Q

What UK firms are subject to SOX?

A

Vodafone, Prudential, HSBC, Shell, BP.

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17
Q

Brazilian Index Name?

A

Bovespa

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17
Q

How many stocks on Bovespa?

What do the stocks on Bovespa Represent?

How often is Bovespa updated?

A

90 Stocks

80% of trading volume over past 12 months

Quarterly

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17
Q

Main Russian exchange?

A

Moscow Exchange Group

Merger between MICEX and RTS

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18
Q

What two things trade on MEG?

A

1) Equity (ETF, Shares, DRs) Settle T+2
2) Debt (Corp, Govt, Muni) T+0

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18
Q

What russian debt does not settle T+0?

A

OFZs : Ruble Denominated T Bills

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18
Q

MEG after 2022?

A

HMRC revoked RSE status

19
Q

Two indian exchanges?

A

BSE
NSE - National stock exchange

20
Q

BSE:

A

1) Oldest in Asia
2) Helped develop Indian Markest
3) >5000 companies
4) Sensex Index

21
Q

BSE List requirements

A

1) 10 crore IPO
2) 3 crore follow up
3) 25 crore market cap
4) 10 crore min issue

22
Q

NSE:

A

1) Automated / Screen Based
2) 2000 Listings
3) Equity + Debt & Expanded to derivative offerings
4) Nifty 50

23
Q

National Securities Depository Limited (NSDL)

A

NSE helped create india’s first CSD

24
Q

Two chinese markets?

A

SSE - shanghai
SZSE - shenzhen

25
Q

A shares?
B shares?
H shares?

A

a shares - RMB denom, china resi’s only or QFII
b shares - foreign investors / resi’s with foriegn accounts
h shares - china companies listed on SEHK - trade in HKD

A+H shares common for dual listing

26
Q

What does QFII stand for?

A

Qualified Foreign Institutional Investors

27
Q

QFII?

A

single qfii cannot hold more than 10% (a share)
all qfii cannot hold more than 30% (a shares)
expanded in 2014 & 18
aim to increase foreign investment (increased quota)

28
Q

2 south african exchanges?

A

JSE
ALT-X

29
Q

JSE?

A

Established following gold rush
was open out cry
changed to ECN 1996
Equities, bonds, derivatives, commodities

400 companies JSE and Alt x

30
Q

alt x?

A

South african

SMe / growth exchange

31
Q

Benefits of EM investing?

A

1) Greater growth (have to catch up to DMs)
2) Diversifcation (globalisation)
3) Underpriced
4) Different industries
5) ineffcient pricing (mispricing)

32
Q

Drawbacks / Risks of EM investing?

A

1) Volatility
2) Liquidity
3) Taxation
4) Repatriation
5) Lack of Regulation
6) Controls on foreign ownership
7) Settlement and Custody
8) Currency Risk

33
Q

What is PIMFA

A

Personal Investment Management & Financial Advice Association

34
Q

What is PIMFAs overall aim?

A

Create an optimal opearting environment

members can then deliver the best service to their clients to help saving and investment

35
Q

PIMFA aims (6)

A

1) Represent the diverse range of firms by providing a unified voice
2) Provide leadership by consolidating knowledge and expertise
3) Create a culture of saving and investment in the UK
4) Lead debate on policy and regulation -> maintain UK as centre of exellence
5) Promote better understanding of sector -> help people invest for future
6) Develop best guidance for practice (through dialogue with stakeholders)

36
Q

What is earnings yield?

A

A valuation measure
- high yield is overpriced
- low yield is underpriced

Market could expect high yield to have better growth & low yield to have poor future performance

37
Q

What is dividend cover?

A

An affodability measure

Are the company paying a dividend out of earnings or reserves?

38
Q

What is a good dividend cover?

A

Above 2 is considered prudential

39
Q

What can a cap be thought as?

A

A call on interest rates

40
Q

What can a floor be thought as?

A

A put on interest rates?

41
Q

When would you use a cap?

A

Lending or borrowing @ floating rate - limit max interest payment

42
Q

What are the benefits of a cap?

A

Limits highest level of borrowing / lending

Cost is known up front

43
Q

When is a floor used?

A

Borrowing and want to guarentee a minimum level of return

44
Q

Benefits of a floor?

A

Lowel levels of return known

Cost of protection is known

45
Q

What is a bill of exchange?

A

An IOU from a customer to a supplier for goods

Promises to pay at a fixed future date

Guarenteed by a bank for a fee

46
Q

Why does a bill of exchange need to be guarenteed?

A

Otherwise it is an IOU with no security / promise

Bank guarentee will ensure payment if the customer defaults

47
Q

What is the process involved in a bill of exchange?

A

1) Supplier sells goods
2) Customer creates bill and gets guarenteed by bank for a fee
3) Customer gives supplier the note
4) Supplier can hold on to it and receive full amount in x days
5) Or sell it in money markets today for a discount

The buyer of the bill will receive the full amount at the future date instead.

48
Q

What is behavioural finance?

A

A field of study which aims to explain investors decision making processes and actions (as well as the market as a whole)

It combined classical economics with psychology

49
Q

What is the under pinning tenant of BF?

A

Investors are not rational

(opposite to what the EMH says)

50
Q

What do irrationalities lead to?

A

Cognitive Biases

Which themselves lead to sub-conscious shortcuts (bad performance and decisions)

51
Q

What are the 4 cognitive biases

A

1) Loss Aversion
2) Anchoring
3) Overconfidence
4) Herd Mentality

52
Q

Loss Aversion
What it is:
What is causes:
How it is overcome:

A

Pain from loss 2x pleasure from a gain (equal amounts)

Investors hold onto losing investments

Overcome by not getting emotionally attached to investments

53
Q

Overconfidence
What it is:
What is causes:
How it is overcome:

A

Investors exaggerate their ability / skills

Causes overtrading and undiversifeid positions

Overcome by investing more and trading less

54
Q

Herd Bias
What it is:
What is causes:
How it is overcome:

A

Investors follow the popular decisions due to societal pressures

Makes bad decisions seem less incorrect

Self-discipline & conducting own research

55
Q
A

CWM Financial Markets (58 decks)

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