An Overview of the Financial World How to Allocate Resources to Maximize Profits
Essay Preview: An Overview of the Financial World How to Allocate Resources to Maximize Profits
Report this essay
An overview of the financial worldHow to allocate resources to maximize profitsPrice of money: interest rateWhat determines the interest rate?Fundamental interest rate =/= benchmark interest rate (federal state)“The money is cheap. The capital is expensive.” What does it mean?The interest rate is high/low. Determined by riskSome investment profits is risky → higher returnsFinancial WorldSell-side: sell financial securities (stocks, bonds, alternatives)Bond: low-risk-low-return financial security, fixed incomeStock (equity): Ownership of sth, relatively-high-risk-high-return financial securityAlternatives (structured products vs. standard products (bond, stock etc.), financial engineering, portfolio): get a CAIAHedge fundPrivate equityFuturesOptionsCommoditiesREITs (Real Estate Investment Trusts)FXFICC: Fixed income instruments, currencies, and commoditiesInvestment banks (broker-dealer)3 divisions: investment banking, sales and trading, researchStock (equity): share of stock represents fractional ownership of an asset e.g. oils, forest, in proportion to the total number of sharesIPO (Initial Public Offering): Initial (First time); Public (over 200 people); Offering (sale)Pros of being a listed company: earn more cash, promote image (been through the whole process of due diligence in order to be listed on a famous exchange e.g. SEHK (Stock Exchange HK) ) etc. (Blank cheque companies cannot be legally listed.)Due diligence (by investment bank): check the real ownership (investigation of a business or person prior to signing a contract, or an act with a certain standard of care)Investment banking: create securities and sell (primary market)Trading/ market maker: create liquidity (secondary market) (easiness of buying and selling things in the secondary market (without affecting the assets’ price) e.g. Bottled water has a higher liquidity than houses in Mata. Secondary market: traders, salesperson of financial securities (call and receive calls from investors)Analyst: stock research and make ratingBulge bracket (world’s most systemically important multinational investment banks and financial institutions; facilitates most global capital movement): Bank of America (Merrill Lynch), Barclays, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and UBS.Bulge bracket > boutiqueBoutique: Jefferies (American multinational investment bank), Rothschild (world’s largest independent financial advisory groups), Lazard (world’s leading financial advisory and asset management) etc. ——————————————————————————————————-Buy-side: Broker: Middlemen; individual persons who arrange transaction between a buyer and a seller Dealer: buyerMutual fund (an investment programme funded by shareholders that trades in diversified holdings and is professionally managed, restricted): Vanguard, State StreetLargest in the world: Ant FinancePension fundInsurance firmIndex fund: Low-risk-low-return but still riskier than bonds; normal return is the return you get from index fundETF (exchange-traded fund): MSCIHedge fund (an offshore investment fund, typically formed as a private limited partnership, that engages in speculation using credit or borrowed capital; cannot sell the product to ordinary investors, but high networks people (hnw); searching for abnormal return): Renaissance, GSAM, Bridgewater, Paulson & Co, AQRProprietary trading firms: Jane StreetQuant trading firms: Two Sigma, Tower Research, SAC (Point72)Trading strategic: momentum, mean reversion…Trading assets: equities, FICC, MBS…IPOs are targeted to the public but private equity/ hedge fund are not (lowest commitment:$10 million)Private equity (capital that is not listed on a public exchange. Within 200 people. Buy shares from the promising company): BlackstoneVCLBO: KKRMBODistressed DebtRetail TradersA private investment in public equity (PIPE) is a private investment firms, a mutual funds or another qualified investors purchase of stock in a company at a discount to the current market value (CMV) per share for the purpose of raising capital.

Get Your Essay

Cite this page

Overview Of The Financial World And Risksome Investment Profits. (April 2, 2021). Retrieved from