Financial Institutions Overview

Flashcards covering key vocabulary and definitions related to various financial institutions discussed in the lecture.

Securities Firms

Financial institutions that primarily act as brokers to transfer funds from net suppliers (households) to net users (corporate sector).

Investment Banking Activities

Activities including origination, underwriting, and placement of debt and equity securities for corporations or governments.

Broker vs. Dealer

A broker acts on behalf of clients, while a dealer trades in their own name.

Market Making

Creating a secondary market in an asset, involving agency or principal transactions.

Venture Capital

Professionally managed pools of equity financing for high-risk, small businesses.

Mutual Funds

Financial intermediaries pooling resources to invest in diversified portfolios, generally facing regulatory restrictions.

Open-end vs. Closed-end Funds

Open-end funds have fluctuating shares purchased directly with the fund, while closed-end funds have fixed shares traded on exchanges.

Capital Appreciation

Increase in the underlying asset values of mutual funds, reflected in their Net Asset Value (NAV).

Hedge Funds

Investment funds that solicit funds from wealthy individuals, with fewer regulatory restrictions than mutual funds.

Life Insurance

Insurance products that provide protection against death, illnesses, and retirement.

Property-Casualty Insurance

Insurance that protects against personal injury and liability due to accidents, theft, or fire.

Adverse Selection Problem

A challenge for insurers where those at a higher risk of loss are more likely to purchase insurance.