Submitted by: Submitted by babyfacekiller
Views: 177
Words: 531
Pages: 3
Category: Business and Industry
Date Submitted: 08/26/2013 03:54 AM
Investment n portfolio NOTE:
Week 1:
Chapter 1: The investment Environment
Real assets versus financial assets:
* Real assets: building, land, machines.
* Financial assets:
* Fixed income or debt: Money market debt (short term, highly marketable, low credit risk) and Capital market debt (long term, can be safe or risky)
* Common stock or equity: Common Stock is equity or ownership in a corporation. Stock holders’ payments depend on the firm’s performance.
* Derivative securities: use to transfer risk by …
Universal Bank Activities:
* Investment Banking: Underwrite new stock and bond issues -> Sell newly issued securities to public in the primary market -> Investors trade previously issued securities among themselves in the secondary market.
* Commercial Banking: Take deposit and make loans.
Housing Finance:
Mortgage Derivatives:
Credit Default Swap: insurance contract against the default of the borrower. Investors bought sub-prime loans (sub-prime loans tend to have a higher rate than the prime rate offered on traditional loans, subprime are often turned away from traditional lenders because of their low credit rating or other factors that suggest that they have a reasonable chance of defaulting on the debt repayment) and used CDS to insure their safety.
Systemic Risk: a potential breakdown of the financial system in which problems in one market spill over and disrupt others.
* Banks: mismatch between the maturity and liquidity of their assets and liabilities.
* Investors: relied too much on “credit enhancement” like CDS. In fact, CDS traded mostly “over the counter” so less transparent
Chapter 2: Asset Classes and Financial Instruments.
Asset Classes: Money market instruments and Capital market instruments.
* Money market instruments: Repurchase agreements, small/large-denomination time deposits, Treasury bills, commercial paper, money market mutual funds are major components of the money...