Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

Financial markets and institutions > from ch 12 to end - final > Flashcards

from ch 12 to end - final Flashcards

(53 cards)

Start Studying
1
Q

“Spot” in ForEx

A

settlement within a couple days

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

“forward: in ForEx

A

settlement for some date in the future

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

“swap” in ForEx

A

the simultaneous transacting of a spot and a forward transaction

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

what are the impacts of a weaker $

A
  • higher inflation
  • more competitive exports
  • foreign currency earnings translate back to more USD
  • fewer foreign currency units needed to repay USD debt
  • more expensive foreign goods
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

initial margin

A

cover future movement in the underlying index

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

variation margin

A

covers the actual movement in prices each day and sometimes intraday

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

futures or forwards

A

lock in a rate or price to be paid or received in the future for a specified amount of a financial instrument or commodity at a specified date

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

futures

A

standardized agreements and traded on an exchange

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

forwards

A

traded OTC and are customized

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

details of forwards and futures

A

the dollar amount, financial instrument, specified price, and date of delivery

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

interest rate swaps

A

an exchange of payments based on a “notional” payment amount

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

what are interest rate swaps commonly used for?

A

the exchange of a fixed rate of interest for a floating rate of interest

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

details of interest rate swaps

A
  • Notional principal value to which the interest rates are applied
  • Fixed interest rate
  • Formula and type of index used to determine the floating rate
  • Frequency of payments
  • Maturity date
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

cross currency swap

A

similar to an interest rate swap except that:
- there is a periodic exchange of payments in two different currencies

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

details of a cross-currency swap

A
  • principal value to be exchanged and to which the interest rates are applied
  • fixed interest rate, if any
  • formula and type of index used to determine the floating rate(s)
  • frequency of payments
  • maturity date
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

credit default swap

A

a contract that protects investors against the risk of default on specific debt securities

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

how do payments in a CDS work?

A
  • The buyer provides periodic(usually quarterly) payments(premium) to the seller who is providing protection(insurance)
  • The seller receives the payments from the buyer but is obligated to reimburse the buyer only if the securities specified in the swap agreement default
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

total return swaps

A

allows investors to potentially buy large stakes that couldn’t be purchased directly in the equity market

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

options contracts

A

Gives you the right but not the obligation to buy/sell in the future at a specified price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

details of an options contract

A
  • Specifies the type of option - right to buy or sell
  • strike price, aka, the exercise price
  • formula and type of index used to determine the floating rate
  • premium or cost
  • date or dates that the options can be exercised
  • maturity date
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Call option

A

right to buy underlying financial instrument at exercise(strike) price within a specified period of time

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

in the money for a call option

Study These Flashcards
A

MP > exercise/strike price

23
Q

at the money

Study These Flashcards
A

MP = exercise/strike price

24
Q

out of the money for a call option

Study These Flashcards
A

MP < exercise/strike price

25
put option
right to sell underlying financial instrument at exercise(strike) price within a specified period of time
26
in the money for a put option
MP < exercise price
27
out of the money for a put option
MP > exercise price
28
London Interbank Offered Rate (LIBOR)
- Was the most widely used floating rate index - Prior to the great recession, this rate reflected an active market for the rate at which banks would borrow from/lend to one another
29
banks
- facilitate the flow of funds from savers to borrowers - Deposit accounts for savers - Loans for borrowers
30
Net Interest Margin
difference between the interest income generated on assets(loans), relative to the amount paid on liabilities(deposits) is the largest income generator for most banks
31
deposit "beta"
Lag in any increase in rates to depositors and increase the rate on loans asap
32
how are banks funded?
- deposit accounts - borrowed (wholesale) funds - long-term sources of funds
33
what is generally the largest source of funding for banks?
deposit accounts
34
demand deposit (checking account0
requires small minimum balance pays no interest
35
savings deposit
- higher interest than a checking account - does not permit check writing - little/no required minimum
36
certificates of deposit (CDs)
require a minimum amount of funds to be deposited for a specified period
37
money market deposit account
- Differs from conventional time deposits in that they do not specify a maturity - Provide limited check-writing and number of withdrawals per month
38
federal funds purchased
depository institutions borrow short-term funds from each other at or around the federal funds rate
39
repurchase agreement
One party sells securities to another with an agreement to repurchase the securities at a specified date and price
40
eurodollar borrowings
Short-term borrowings of U.S. dollars from foreign banks or foreign branches of U.S. banks outside the United States
41
Primary credit rate
a lower interest rate for best-capitalized institutions
42
Secondary credit rate
a higher interest rate for less well capitalized institutions
43
federal funds sold
depository institutions to lend short-term funds to each other at or around the federal funds rate
44
reverse repurchase agreement
bank lends funds and takes securities as collateral from another institution with an agreement to return the securities and receive the cash back at a specified date and price
45
LFI rating system is composed of the following three components:
1) Capital Planning and Positions 2) Liquidity Risk Management and Positions 3) Governance and Controls
46
CAMELS components
- capital adequacy - asset quality - management - earnings - liquidity - sensitivity to market risk
47
basics of a savings and loans institution
- A deposit institution specializing in mortgage lending - Typically, <$1B in assets and serving local communities - Classified as either stock owned or mutual (owned by depositors)
48
basics of finance companies
- Specialty providers of short- and medium-term credit - May be independently owned or a subsidiary within a larger organization (e.g., Ford providing auto loans) - >$1 Trillion in assets across Finance Companies
49
consumer financial protection bureau
responsible for regulating various consumer finance products and services that may be offered by finance companies and other institutions
50
credit union basics
- A special form of mutual depository institution owned by the depositors - Offer similar accounts and services as banks, but are nonprofit - Lower loan rates and higher deposit rates
51
mutual fund
buys investments with money pooled from multiple investors and invests those funds in a wide variety of assets
52
securities firms and broker-dealer basics
- Act as an intermediary between investors and issuers in equity offerings - Provide advisory services to corporations and governments - Provide liquidity to markets through market-making activities - Sell securities to their clients and perform analysis of companies - Perform proprietary trading activities
53
Financial Industry Regulatory Agency
a non-profit agency that overseas securities firms

Financial markets and institutions (8 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions