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Investment And Portfolio Management > Chapter 1 > Flashcards

Chapter 1 Flashcards

1
Q

It provides the link between organizations needing capital and those with capital available for investmenr

A

Financial service sector

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2
Q

Plays a critical role in all advanced economies, and that the services it provides can be broken down into three core functions

A

Financial service sector

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3
Q

Three core functions

A

Investment chain
Risk
Payment systems

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4
Q

Through this, savers and borrowers are brought together

A

Investment chain

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5
Q

Provide financing to businesses and businesses wish to grow offer opportunities for savers tp take part in the growth and resulting potential returns

A

Savers

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6
Q

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

A

Risk

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7
Q

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

A

Risk

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8
Q

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

A

Payment systems

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9
Q

It is an essential requirement for commercial activities to take place and for participation in international trade and investment

A

Payment systems

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10
Q

What are the 5 financial markets

A

Equity markets
Bond markets
Foreign exchange markets
Derivatives markets
Insurance markets

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11
Q

Are the best known of the financial markets and facilitate the trading of shares in quoted companies

A

Equity markets

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12
Q

Is the largest stock exchange in the world

A

New york stock exchange(NYSE)

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13
Q

Is the value of shares listed on an individual exchange

A

Domestic market capitalization

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14
Q

Was ranked as the 2nd largest

A

NASDAQ

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15
Q

is the worlds third largest market

A

Japan exchange group

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16
Q

Are systems that bring together multiple parties that are interested in buying and selling financial instruments

A

Multilateral trading facilities (MTFs)

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17
Q

Financial instruments including

A

Shares
Bonds
Derivatives

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18
Q

These systems are also known as crossing networks or matching engines that are operated by an investment firm or anothe market operator

A

MTF

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19
Q

Are the largest of all financial markets, with average daily turnover in excess of 5 trillion US Dollar

A

Foreign Exchange Markets

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20
Q

Meaning one where brokers/dealers negotiate directly with one another, there is no central exchange or clearing house

A

Forex as OTC Market

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21
Q

Is concentrated in a small number of financial centres

A

Forex trading

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22
Q

Releases figures on the composition of the Forex market every three years

A

Bank for International Settlements (BIS)

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23
Q

Main locations for forex trading

A

UK
US
Japan
Hongkong
Singapore
Others

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24
Q

Trade a range of complex products based on underlying instruments, including currencies, indices, interest rates, equities, commodities, and credit risk

A

Derivative markets

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25
Underlying instruments
Currencies Indices Interest rates Equities Commodities Credit risk
26
Derivatives based on these underlying elements are available on both
Exchange traded market OTC market
27
Is where trading takes place directly between parties rather than on an exchange and tha trading of derivatives is increasingly moving from OTC to trading on exchange
OTC market
28
The largest of the exchange traded derivatives markets
Chicago Mercantile Exchange
29
Dominates trading in the OTC derivatives markets worldwide
Europe
30
The next largest segment and which are used to speculate on currency movements and to hedge tge risks of currency positions
Forex derivatives
31
Specialize in the management of personal risk, corporate risk and peotection of life events
Insurance markets
32
What are the 13 participants
Investment banks Custodian banks Retail or commercial banks Savings institution Peer-to-peer and crowd funding Insurance companies Retirement schemes Fund managers Stockbrokers and wealth managers Private banks Sovereign wealth funds Trade bodies Third party administrators
33
Provide advice and arrange finance for companies that want to float on the stock market, raise additional finance by issuing further shares or bonds
Investment banks
34
They also provide services for institutional firms that might want to invest in shares and bonds in particular pension funds and asset managers
Investment banks
35
A number of banks have diversified their range of activities by developing businesses such as
Proprietary trading Servicing hedge funds Making private equity instruments
36
Are banks that specialize in safe custody services, looking after portfolios of shares and bonds on behalf of others,
Custodians
37
Collecting income from assets, namely dividends in the case of equities and interest in the case of bonds, and processing corporate actions
Asset servicing
38
Provide services such as taking deposits from, and lending funds to retail customers, as well as providing payment and money transmission services
Retail or commercial banks
39
They may also provide similar services to business customers
Retail or commercial banks
40
Most countries also have this that started off by specializing in offering savings products to retail customers
Savings institutions
41
Savings institutions are known by different names around the world Spanish North america Australia and UK
Cajas Credit unions Building societies
42
They are typically jointly owned by the individuals that have deposited or borrowed money from them
Savings institutions
43
Cuts out the banks so that the borrowers often receive slightly lower rates,
P2P lending
44
Provides solutions for much more than the standard areas, such as life cover and general insurance cover
Insurance industry
45
Is a key area of financial advice, and the insurance industry provides a variety of products to meet many potential scenarios
Protection planning
46
Collect premiums in exchange for the coverage provided
Insurance companies
47
Will also hold a large amount of cash to be able to satisfy any claims that may arise on the various policies, if required, will liquidate investment holdinga
Insurance companies
48
Are one of the key methods by which individuals can make provision for their retirement needs
Retirement schemes or pension schemes
49
Are large, long term investors in shares, bonds and cash
Retirement schemes
50
Fund managers are also known as
Investment managers Portfolio managers Asset managers
51
They run portfolios of investment for others
Fund managers
52
They invest money held by institutions, such as pension funds and insurance companies as well as wealthier individuals
Fund managers
53
Also known as asset managemenr
Fund management
54
Will buy and sell shares, bonds and other assets in order to increase the value of their clients portfolioa
Investment managers
55
Arrange stock market trades on behalf of their clients
Stockbrokers
56
They may advice investors about which shares, funds or bonds they should buy or they may offer execution only services, when the broker executes a trade on a clients instruction without providing advice
Stockbrokers
57
Four main categories of stockbrokers
Execution only stockbrokers Robo advisers Advisory and discretionary wealth managers Institutional brokers
58
These offer telephone or internet based trade execution and settlement for retail clients
Execution only stockbrokers
59
A recent innovation, is an online wealth management service that provides automated, algorithm based portfolio management advice without the use of human financial planners
Robo advisers
60
These offer a wealth management service to private investors either advice only or a fully managed advice
Advisory and discretionary wealth managers
61
Who arrange trades on behalf of large institutions
Institutional brokers
62
Provide a wide range of services for their clients, including wealth management, estate planning, tax planning, insurance, lending and lines of credit
Private banks
63
Their services are normally targeted at clients with a certain minimum sum of investable cash or minimum net worth
Private banks
64
Private banking is offered both by domestic banks and by those operating offahore
Private banking
65
Is a state owned investment fund that holds financial assets such as equities, bonds, real estate, or other financial instruments
Soverign wealth fund (SWF)
66
Undertake investment administration on behalf of other firms, and specialize in this area of the investment industry
Third party administrators

Investment And Portfolio Management (6 decks)

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