| 
  • If you are citizen of an European Union member nation, you may not use this service unless you are at least 16 years old.

  • You already know Dokkio is an AI-powered assistant to organize & manage your digital files & messages. Very soon, Dokkio will support Outlook as well as One Drive. Check it out today!

View
 

Financial markets

Page history last edited by Brian D Butler 15 years, 3 months ago

Table of Contents


 

 

 

 

Bank-dominated vs. Market-dominated financial system

 

By Mark Carney

 

Brief summary: "Our response to the financial crisis will be as important as the event itself. We can never eliminate financial crises, but we can reduce their likelihood and severity.

 

This crisis marks the reversal of a decades-long transition from a bank-dominated to a market-dominated financial system. The market-based model has the potential to price risk and to allocate capital more efficiently. In some cases, however, the development of markets ran well ahead of the supporting infrastructure. A system that appeared resilient (and enormously profitable) in times of low volatility has proven brittle in the face of shocks.

 

...there is a sudden re-emphasis on bank-based intermediation that has led to an urgent need for banks to raise very large amounts of capital. This threatens to intensify the global economic slowdown if not managed properly.

 

...The second strategy recognises that the transition towards a market-based financial system has increased the importance of core money markets. In economies with weak banks and large non-bank sectors, massive central bank liquidity is not yet cascading through the system. Non-bank participants – such as money market funds, pension funds and hedge funds – fear that liquidity may not be continuously available. Their fears will not fade without structural changes to markets."

 

Continue reading “Towards a more resilient financial system”

 

 

 

 

Financial Markets

 

Financial markets are made up of two different types of markets:

1.  Capital Markets - markets for long-term debt and for equity shares (stocks and bonds)

                               - traded on exchanges

                               - use stock broker, who acts as agent for buyer, but they do not take ownership (no inventory)

 

2.  Money Markets  - markets for short term debt (less than one year)

                               -  group of loosely connected markets

                               -  dealer markets where dealers take ownership, and build inventory of assets to sell (at own risk)

                               -  read more here

 

 see also:International Finance markets

 

 

 

Markets and exchanges

 

By type

 

Global Stock Markets  (Equity)

 

Bond Markets

 

Money markets

 

Currency Markets

 

Commodities Markets

 

 

By Region - how can foreign investors invest in these markets?

 

It is not good enough to know the list of , but you need to know how can you invest in these markets, and take advantage of the opportunities.  Once you have studied our list of global trends, how do you take advantage in markets around the world.

 

1.  If there is a particular company that you want to invest in:

  • ADR an "American Depository Receipt" is when a foreign company lists on the NYSE (or other exchnge) in hopes of attracting US investors.  Look to see if that company is listed locally.

 

2.  If there is a currency you think will appreciate:

  • buy / sell , futures, options....

 

3.  If you believe that a particular region in the world will do well / or a stock market somewhere in the world will do well:

 

 

Important Regional markets, and how to invest in them:

 

Asia: 

China's stockmarket

For more information on the different Chinese stock exchanges, see the URLs for:

 

• Shanghai Stock Exchange http://www.sse.com.cn/

 

 

• Shanghai Stock Exchange http://www.sse.com.cn/

 

• Shenzhen Stock Exchange http://www.sse.org.cn/

 

• Taiwan Stock Exchange http://www.tse.com.tw/

 

The Stock Exchange of Hong Kong http://www.sehk.com.hk/index.htm

 

 

Latin America: 

ETF's Brazil

 

USA: 

Europe:

more:

 

 

 

 

How to invest in these markets:

 

Trade the "asset class":

  • The easiest way to invest in foreign markets is through Exchange Traded Funds (ETF's).   To do so, you need an account with a broker. 

 

 

 

 

Primary vs. Secondary markets

 

 

Primary markets

where corporations and governments first issue the equity or debt for the first time to the public.

 

Debt - is underwritten by a syndicate of banks.  The syndicate of banks buys the debt from the company, and then resells it to the public at a higher price.  

 

Publicly offered equity or equity must be registered with the SEC (Securities and Exchange Commission) with full disclosure about the financial health of the company.  The costs of issuing public equity or debt can be overwhelming to many companies, so they often avoid public offerings and prefer to go with "private placements", where the debt or equity is sold under private negotiations between the company and large financial institutions (insurance companies, mutual funds, etc).   Because they are private, the company does not need to register these placements with the SEC.  

 

 

Secondary markets

 

where debt and equity are traded after they have previously been offered.   There are two types of secondary markets;  (a) auction markets, and (b) dealer markets.

 

Auction markets are the type you see where stocks are traded in an open stock market such as the New York Stock Exchange .

 

Debt, on the other hand, is normally traded in dealer markets, and not on open auction markets (exchanges).  This consists of dealers communicating directly with one another by phone, fax, internet.  Sometimes stocks are also traded in dealer markets, and are then called "over the counter" (OTC).   The NASDAQ (national association of securities dealers automated quotation system) is the most famous OTC system.   It now behaves much more like a regular stock exchange, but its origins were OTC.

 

The auction markets such as the NYSE are different than dealer markets in that all trading occurs on one floor (the floor of the NYSE).  This is fundamentally different than the NASDAQ which is more of a connection of computer screens and dealers.  Other than the NASDAQ, most OTC dealer markets are not communicated daily to the public.

 

 

 

 

 

 

Financial Issues

 

Financial Reporting

income statement

balance sheet

cash flow statement

financial statement analysis

 

Valuation

business valuation

discount rate - guide for startup valuations

time value of money, interest, discount rates

 

 

Fund Raising

Corporate Finance 101

Sources of funding for a business

 

Dealing with equity investors

issuing shares

Board of Directors

stock options

dividends

stock splits

treasury stock

 

International Financial markets

 

Carry Trade

 

 

 

 

 

 

Financial markets

 

Bond market
Fixed income
Corporate bond
Government bond
Municipal bond
Bond valuation
High-yield debt

Stock market
Stock
Preferred stock
Common stock
Registered share
Voting share
Stock exchange

Foreign exchange market
Retail forex

Derivatives market
Credit derivative
Hybrid security
Options
Futures
Forwards
Swaps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comments (0)

You don't have permission to comment on this page.