Financial Markets Review-Valery

Financial Markets Review-Valery - Financial Markets Review...

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Financial Markets Review Chapter 1, 7, 8, 13, 3, 10, 11, 12, 16, 17 Chapter 1 I. Assets- something that has value in exchange A. tangible asset- material possessions B. intangible assets- legal claim to future benefits i. financial assets II. Financial Markets A. money vs. capital markets B. principal vs. secondary markets III. Globalization of financial markets A internal i. domestic ii. foreign B. external IV. Derivative Markets A. Futures B. Options i. Call ii. Put Chapter 7 I. Insurance Companies A. underwriting process B. payments II. Types of Insurance A. Life Insurance B. Health Insurance C. Property and Casualty Insurance D. Liability Insurance E. Disability insurance F. Long-Term Care Insurance G. Structured settlements H. Investment-Oriented products I. Annuity III. Fundamentals of insurance industry IV Regulation of insurance industry A. McCarran Ferguson Act of 1995 B. National Association of Insurance Companies (NAIC) C. GAAP V Structure of Insurance Companies A. actual insurance company B. Investment Company
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i. bankassurance VI Forms of Insurance Companies Chapter 8: Investment Companies and Exchange- Traded Funds I. Types of investment companies a. Open-End Funds (mutual funds) i. Investors own a pro rata share ii. Investment manager of the fund is actively managing the portfolio, buying and selling securities iii. Each share is called the net asset value (NAV) 1. NAV= (market value of portfolio-liabilities)/ number of shares 2. NAV is determined once a day at the end of the day- all new investments and withdrawals are priced at this closing value 3. NAV only changes if prices of security in portfolio change 4. The number of shares vary, depending on the number of investments and withdrawals in a given day b. Close-End funds i. Act like common stock ii. There are a constant number of shares iii. After initial sale, shares are traded in a secondary market iv. Price is determined by supply and demand for fund 1. must pay brokerage fee to buy or sell 2. may fall above (“trading at a premium) or below (“trading at a discount”) the NAV 3. “lifeboat provisions” exist to that require fund managers to buy back shares or open the fund if discount is too large v. Investment Company Act of 1940 - allows closed-end funds to be capitalized only once at the initial public offering (IPO) and number of shares is determined there c. Unit Trusts i. Fixed number of certificates ii. Typically invests in bonds iii. There is no active trading of the bonds in the portfolio iv. There is a fixed termination date v. Sales commission is charged for purchase of certificate and also for the underwriting process of creating the portfolio II. Growth of Mutual Funds a. Conversion to financial assets- during 1990’s there was a large shift from tangible assets to financial assets , esp corporate equities b. Also a shift from direct ownership in stocks to indirect in mutual funds i. Growth of tax-deferred investing for retirement
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Financial Markets Review-Valery - Financial Markets Review...

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