Module 2: Investment Firms & Financial Institutions

Buy-side firms

Institutional investors and investment managers who purchase investment products and services from sell-side firms.

Sell-side firms

Typically, investment banks, brokers, and dealers that provide investment products and services.

Front office

Client-facing activities that provide direct revenue generation, such as sales, marketing, and customer service activities.

Middle office

Core activities of a firm, such as risk management, information technology, corporate finance, portfolio management, and research.

Back office

Administrative and support functions necessary to run the firm, including accounting, human resources, payroll, and operations.

Financial institutions

Financial intermediaries, such as banks and insurance companies, whose role is to collect money from savers and to invest it in financial assets.

Insurance companies

Financial institutions that help individuals and companies offset the risks they face; also among the largest investors.

Banks

Financial institutions that collect deposits from savers and transform them into loans to borrowers.

Deposit-taking institutions

Financial institutions that take deposits, such as banks; also called depository institutions.

Fraud

Intentional deception, such as deliberately causing or falsely reporting losses to collect insurance settlements.

Moral hazard

Tendency of people to be less careful about avoiding losses once they have purchased insurance, potentially leading to losses occurring more often when they are insured than when they are not.

Adverse selection

Tendency of people who are most at risk to buy insurance, causing insured losses to be greater than average losses.