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International Introduction to Investment > The Financial Services Sector > Flashcards

The Financial Services Sector Flashcards

1
Q

What are the 3 core functions of the financial services sector?

A

Investment chain, risk and payment systems.

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2
Q

What is the purpose of equity markets?

A

To facilitate the trading of shares in quoted companies.

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3
Q

What is Global Market Capitalization?

A

The total value of the shares quoted on the world’s stock exchanges.

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4
Q

Name 3 stock exchanges

A

LSE, NYSE, Euronext, SIX Swiss, Deutsche Borse and Nasdaq.

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5
Q

What is rival to traditional stock exchanges?

A

Multilateral trading facilities.

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6
Q

Who is the main issuer of bonds?

A

Governments.

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7
Q

What types of bonds are there?

A

Domestic and international.

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8
Q

Which country has the largest bond market?

A

The US.

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9
Q

Which is the largest market?

A

FX.

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10
Q

What is the purpose of the FX market?

A

To allow parties to deal with their inflows and outflows denominated in different currencies.

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11
Q

What type of market is the FX market?

A

An over the counter market.

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12
Q

Define an OTC Market.

A

There is no central exchange, parties deal with one another directly.

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13
Q

Who is the FX market provided by?

A

Major banks.

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14
Q

What types of products are traded on the derivatives market?

A

Indices, interest rates, commodities, currencies and credit risk.

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15
Q

What type of market is the derivatives market?

A

An OTC and exchange traded market.

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16
Q

What was the growth in the derivatives market a reaction to?

A

The 2000-02 stock market crash.

17
Q

What are derivatives used to do?

A

Hedge against risk and for speculation.

18
Q

What is the purpose of insurance markets?

A

To manage personal and corporate risks and to provide protection against life events.

19
Q

Who are the largest insurance companies?

A

China Life, Allianz, AXA and Lloyds.

20
Q

What does reinsurance do?

A

Provides insurance to insurance companies.

21
Q

What is the purpose of investment banks?

A

To provide advice and arrange finance for those wishing to float on a stock exchange and to carry out mergers and acquisitions.

22
Q

What do custodian banks do?

A

Look after portfolios of shares and bonds on behalf of others.

23
Q

What is the purpose of a retail bank?

A

To take deposits from and lend to retail customers.

24
Q

Define financial conglomerate.

A

A group of companies whose activities consist of services in at least 2 different financial sectors.

25
Q

Who jointly owns savings institutions?

A

Its members (borrowers).

26
Q

Define demutualization.

A

When a savings institution transforms itself into a bank and floats on a stock exchange.

27
Q

What is the benefit of P2P or Crowd Funding?

A

Borrowers receive slightly lower interest rates and lenders receive much higher interest rates. Middle man is cut out.

28
Q

What are the negatives of P2P or Crowd Funding?

A

Risks can be much higher, immediate withdrawals are not always possible and it may take time for interest rates to be reduced for borrowers.

29
Q

How is the insurance industry a big investor?

A

The premium income provided by its clients is invested into equities and bonds.

30
Q

What is the main purpose of insurance companies?

A

Managing risk effectively.

31
Q

What are the 2 types of retirement schemes available?

A

Employer provided or self-directed.

32
Q

What do fund managers do?

A

Run portfolios of investments for others. Buy and sell shares, bonds etc in order to increase their clients portfolio.

33
Q

What are the 2 types of fund managers?

A

Institutional and Private Client.

34
Q

What do stock brokers do?

A

Arrange stock market trades on behalf of others.

35
Q

What are the different types of broking services available?

A

Execution only, Robo-advisors, discretionary (fully managed) and institutional.

36
Q

What is a sovereign wealth fund?

A

An investment fund that is state owned but not always publicly owned.

37
Q

What types of investments do SWF focus on?

A

Investments abroad and a diverse portfolio that allows for risks to be managed effectively.

38
Q

What is the body who created the Santiago Principles called?

A

The International Group of SWF.

International Introduction to Investment (9 decks)

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