Studied by 2 people
auction market
all transactions happen in one location
main function of financial markets
facilitate the transfer of capital from people who have extra to people who need it
3 parts of the wealth transfer process
financial instruments, markets, intermediaries
direct investment
asset that generates wealth
indirect investment
financial assets issued by government
sources of capital
retail, institutional, foreign investors
users of capital
businesses, governments
how do businesses use capital
earn/raise money
how do governments use capital
issue debt
role of investment funds
buy/sell stock through mutual fund
role of derivatives
get value from another asset and used for hedging
role of private equity
invest, made directly by businesses, funds provided through pension, endowments, wealthy people
characteristics of an efficient market
fast, cheap, liquid
primary markets
securities are sold by issuers for the first time, funds go to the issuer
secondary markets
securities previously issued are bought/sold, funds go to who sold the shares
stock exchange trends
transferred from physical locations to trading systems, speed and cost efficiency are crucial, stock exchanges around the world are joining together
cash flows depend on…
political environment, economic trends, fiscal/monetary policy, investment opportunities, labour force
examples of financial instruments
debt, equity, investment funds, derivatives, private equity
examples of financial intermediaries
banks, insurance companies, pension, investment dealers, private equity, venture capitalists
how does a stock exchange make money
Transaction fees, Initial listing fees, Fees from capital structure changes, Sale of historic data
Note
Flashcard