chapter 1 Flashcards
(25 cards)
What is the primary role of the financial services sector in the economy?
The financial services sector provides the link between organisations needing capital and those with capital available for investment.
What are the two distinct areas within the financial services sector?
- Wholesale sector
- Retail sector
What activities are included in the wholesale financial markets?
- Equity markets
- Bond markets
- Foreign exchange
- Derivatives
- Insurance markets
What is the focus of the retail sector in financial services?
- Retail banking
- Insurance
- Pensions
- Investment services
- Financial planning and financial advice
What do equity markets allow companies to do?
Raise capital by selling shares to investors.
Who are the primary participants in equity markets?
- Individual investors
- Institutional investors
- Traders
- Market makers
What influences share prices in equity markets?
- Company performance
- Economic indicators
- Geopolitical events
- Investor sentiment
What is a benchmark index?
A benchmark index tracks the performance of a representative basket of shares.
Name three examples of benchmark indices.
- S&P 500
- Dow Jones Industrial Average (DJIA)
- FTSE 100
What are the primary functions of equity markets?
- Capital allocation
- Price discovery
- Liquidity provision
True or False: Equity markets operate on a decentralized basis with no central exchange.
False.
What is the role of regulatory bodies in equity markets?
Establish rules and monitor market activities to ensure fair and transparent trading.
What advancements have transformed equity markets?
- Electronic trading platforms
- Algorithmic trading
What are bond markets also known as?
Fixed-income markets.
Who issues bonds in the bond markets?
- Governments
- Companies
- Supranational agencies
What factors shape the dynamics of bond markets?
- Interest rates
- Economic conditions
- Credit risk
What is the primary purpose of forex markets?
Facilitate the exchange of one currency for another.
Who are the primary participants in forex markets?
- Central banks
- Commercial banks
- Institutional investors
- Companies
- Governments
Fill in the blank: Forex markets operate in a ________ manner.
decentralised
What do participants use forex markets for?
- International trade
- Investment
- Speculation
- Risk management
What are derivatives markets based on?
- Currencies
- Indices
- Interest rates
- Equities
- Commodities
- Credit risk
What are the two most well-known derivatives?
- Futures
- Options
What is Lloyd’s known for?
Being the world’s specialist insurance market.
What is reinsurance?
Insurance that insurers use to protect themselves against risks.
