2022 Exam

Question 1

Credit Spread

Answer 1

The difference between the yield of two different debt instruments with the same maturity but different credit ratings

Question 2

Reddit discussion boards & short squeeze of meme stocks

Answer 2

Big investors stand to lose money on their short sales if a shorted stock becomes the subject of a meme and its price increases. Social media users may also get excited about the prospect of Wall Street investors losing money hence reddit discussion boards

Question 3

Critical mass in payments

Answer 3

A company achieves critical mass when it has paid back initial investors and at the same time can continue running the business profitably without any additional investment required.

Question 4

Benchmark manipulation

Answer 4

motive of profit by introducing element of their speculative interest into the fundamentals of supply and demand to enhance the value of a portfolio. Trading desks is just one example.

Question 5

Law of one price

Answer 5

States the price of an identical asset or commodity will have the same price globally, regardless of location, when certain factors are considered.

Takes into account a frictionless market, where there are no transaction costs, transportation costs, or legal restrictions, the currency exchange rates are the same, and that there is no price manipulation by buyers or sellers.

Question 6

Shadow banking system

Answer 6

Term used to describe bank-like activities (mainly lending) that take place outside the traditional banking sector. They raise short-term funds in the money markets and use those funds to buy assets with longer-term maturities

Question 7

Twin Crisis

Answer 7

Simultaneous crisis in banking and currency.

Question 8

P2P Lending

Answer 8

Enables individuals to obtain loans directly from other individuals, cutting out the financial institution as the middleman