Trade Settlement Flashcards
What is portfolio management?
The art and science of making decisions about investment mix and policy to match financial goals.
True or False: Trade settlement refers to the process of transferring ownership of securities after a trade has been executed.
True
Fill in the blank: The __________ is the date on which a trade is executed.
trade date
What is the primary goal of portfolio management?
To maximize returns while minimizing risk.
Multiple Choice: Which of the following is NOT a type of portfolio management strategy? A) Active B) Passive C) Reactive D) Strategic
C) Reactive
What does the term ‘diversification’ mean in portfolio management?
The practice of spreading investments across various assets to reduce risk.
True or False: The settlement date is typically one business day after the trade date for most securities.
False
What are the two main types of trade settlements?
Cash settlement and delivery settlement.
Fill in the blank: In portfolio management, __________ refers to the balance between risk and return.
risk-return trade-off
Multiple Choice: What is the primary purpose of trade settlement? A) To finalize the trade B) To analyze the market C) To increase trading volume D) To issue dividends
A) To finalize the trade
What is an example of a portfolio management tool?
Asset allocation models.
True or False: Trade settlement can occur through electronic systems or manual processes.
True
What is meant by ‘liquidity’ in the context of portfolio management?
The ease with which an asset can be converted into cash without affecting its market price.
Fill in the blank: A __________ is a financial instrument that represents ownership in a company.
stock
Multiple Choice: Which of the following is a common risk in portfolio management? A) Market Risk B) Credit Risk C) Operational Risk D) All of the above
D) All of the above
What does the term ‘settlement risk’ refer to?
The risk that one party in a transaction will fail to deliver the terms of the contract.
True or False: The clearinghouse acts as a mediator between buyers and sellers during trade settlement.
True
What is the role of a custodian in trade settlement?
To safeguard financial assets and manage the settlement process.
Fill in the blank: The __________ is the agreed-upon price at which a security will be bought or sold.
execution price
Multiple Choice: What is a benefit of active portfolio management? A) Lower costs B) Potential for higher returns C) Less time-consuming D) Simplicity
B) Potential for higher returns
What does ‘rebalancing’ mean in portfolio management?
Adjusting the weights of assets in a portfolio to maintain a desired risk level.
True or False: All trades must be settled on the same day they are executed.
False
What is a key consideration when selecting securities for a portfolio?
The correlation of the securities with each other.
Fill in the blank: __________ analysis is used to evaluate the performance of a portfolio.
Performance
