Contemporary Issues in Management - Lecture Notes

Flashcards based on key concepts from the lecture notes on Contemporary Issues in Management.

Primary Markets

Markets where users of funds like corporations and governments raise funds by issuing financial instruments such as stocks and bonds.

Secondary Markets

Markets where financial instruments are traded among investors.

Money Markets

Markets that trade debt securities with maturities of one year or less.

Capital Markets

Markets that trade debt and equity instruments with maturities of more than one year.

Foreign Exchange Markets (FX)

Markets that deal in trading one currency for another.

Derivative Security

An agreement between two parties to exchange a standard quantity of an asset at a predetermined price on a specified date in the future.

Financial Institutions (FIs)

Institutions that channel funds from those with surplus funds to those with shortages of funds.

Types of Financial Institutions

Includes commercial banks, thrifts, insurance companies, securities firms, finance companies, mutual funds, and pension funds.

Monitoring Costs

Cost associated with the monitoring of financial intermediaries.

Liquidity Risk

Risk arising from the difficulty of selling an asset without causing a significant movement in its price.

Regulation of Financial Institutions

FIs are regulated to prevent failure and ensure the stability of financial markets.

Globalization of Financial Markets

The trend of financial markets becoming more interconnected and growing due to international investment.

Direct Financing

A method of financing where users of funds obtain funds directly from suppliers of funds.

Indirect Financing

A method of financing where financial institutions act as intermediaries to channel funds.

Derivative Security Markets

Markets in which derivative securities trade.

Risks Faced by Financial Institutions

Includes interest rate risk, foreign exchange risk, market risk, credit risk, and liquidity risk.