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LESSON: 4-7 MIDTERM EXAM
is the process of administering to the financial assets and holdings of business.
Treasury Management
The treasury function is responsible for high-value, time-critical transactions that can be complex in nature.
Need for control
The function is often responsible for managing financial risks (foreign exchange, interest rates and liquidity risk), counterparty and operational risks.
Risk reduction
With this information processes can be re-engineered and metrics can be developed to monitor how well they are run over time
Process improvement
Treasuries are generally under-resourced and often this is due to their inability to demonstrate their value to the organization.
Demonstrate value to organization
is it is where the financial instruments with high liquidity and very short maturities are traded.
Money Market
are the investment fund where number of investors invest their money in mutual fund institutions, and they diversify the funds in various schemes.
Money market mutual funds
are the investment fund where number of investors invest their money in mutual fund institutions, and they diversify the funds in various schemes.
Money market mutual funds
Deposits made in U.S. dollars at a bank or bank branch located outside the United States.
Eurodollar deposit
short-term debt obligations of a national government that are issued to mature in three to twelve months.
Treasury bills
Pooled short-maturity, high-quality investments that buy money market securities on behalf of retail or institutional investors.
Money funds
exchanging a set of currencies in spot date and the reversal of the exchange of currencies at a predetermined time in the future.
Foreign exchange Swaps
It is the process of changing in one currency into another currency for a variety of reasons usually for commerce ,trading or tourism.
Foreign Exchange
is an international market where currencies are traded. It is a unique aspect of market where there is no central marketplace for foreign exchange.
Forex Exchange
is conducted electronically over the counter –the counter (OTC) which means that all transactions occur via computer network between traders around the world.
Currency trading
Commercial finance is made available to the traders through bill of exchange which are discounted by the bill market.
Financing trade
The money market contributes to the growth of industry.
Financing industry
The Money Market enables the commercial banks to use their excess reserves in profitable investment
Profitable investment
Developed money markets help the commercial banks to become self-sufficient.
Self-sufficiency of commercial bank
Money markets help central banks in :
a) Short-run interest rates serve as an indicator of the monetary and banking conditions in the country and,
b) help the central bank secure quick and widespread influence on the sub-markets, thus facilitating effective policy implementation.
Help to central bank
is a financial contract that derives its value from an underlying asset. The buyer agrees to purchase the asset on a specific date at a specific price.
Financial Derivatives
These bundle debt like auto loans, credit card debt, or mortgages into a security. Its value is based on the promised repayment of the loans.
Collateralized Debt Obligation
It is an agreement to exchange one asset or debt for a similar one.
SWAP
An agreement to buy or sell an asset at an agreed-upon price at a specific date in the future. The two parties can customize their forward a lot.
Forwards
the most widely used are commodities futures.
Futures contract
a type of derivatives that gives the buyer the right to buy (CALL OPTION) or sell the stock (PUT OPTION)
OPTION
is the analysis of tradeable financial instruments called securities. It deals with finding the proper value of individual securities.
Security Analysis and Portfolio Management
are financial assets that define the terms of a loan between an issuer and the investor.
Debt security
are financial assets that represent ownership of a corporation.
Equity securities
is a financial instrument whose value depends upon the value of another asset.
derivative security
is an asset that has features of two different financial instruments, like a bond that can be converted into shares of a company.
Hybrid security
means that an asset is bought, or that money is put into is total amount of money spent by an investor
Investment
Portfolio managers actively participate in the trading of securities with a view to earning a maximum return to the investor.
Active Portfolio Management
Portfolio managers are concerned with a fixed portfolio, which is created in alignment with the present market trends,
Passive Portfolio Management
The Portfolio Management in which the investor places the fund with the manager and authorizes him to invest them as per his discretion, on the investor’s behalf.
Discretionary Portfolio Management
Portfolio management is one in which the portfolio managers give advice to the investor or client, who can accept or reject it.
Non-Discretionary Portfolio Management-
Are used to hedge risk in commodities, interest rates and exchange rates
Forward contract
Consist of stocks that are traded on the stock exchanges and stock mutual funds where the money of a large number of investor is pooled and spread over a number of different stocks.
Equity Investment
Include vehicles like corporate or government bonds or bonds mutual funds
Fixed-income investment
Is the art and science of making decisions about investment mix and policy, matching investment to objectives, asset allocation for individuals and institutions, and balancing risk against performance.
Portfolio investment
Such as time deposit from consumer bank, thrift banks and credit unions.
Certificate of deposit
By selling securities to an investor with an agreement to repurchase them at a fixed price on a fixed date.
Repurchase agreement
