Summary of Marc Levinson's Guide to Financial Markets , livre ebook

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47 pages

English

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Description

Please note: This is a companion version & not the original book.
Sample Book Insights:
#1 The Euro is slightly higher against the yen. The Dow Jones Industrial Average is off 18 points in active trading. A Chinese airline loses millions of dollars with derivatives. Following the Bank of England's decision to lower its base rate, monthly mortgage payments are set to fall.
#2 Financial markets have been around since the beginning of mankind. They have evolved over time, and today, they are handled computer to computer with minimal human intervention.
#3 Financial markets serve the same basic functions: price setting, asset valuation, arbitrage, raising capital, commercial transactions, investing, and risk management.
#4 The figure of $4. 5 trillion for 2011, which is the amount of money that was lent in that year, represents only a single year’s activity. If all financial activities were to be included, the total size of the markets would be much larger.

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Finance

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Publié par	Everest Media LLC
Date de parution	01 avril 2022
Nombre de lectures	0
EAN13	9781669375227
Langue	English
Poids de l'ouvrage	1 Mo

Informations légales : prix de location à la page 0,0150€. Cette information est donnée uniquement à titre indicatif conformément à la législation en vigueur.

Extrait

Insights on Marc Levinson's Guide to Financial Markets
Contents Insights from Chapter 1 Insights from Chapter 2 Insights from Chapter 3 Insights from Chapter 4 Insights from Chapter 5 Insights from Chapter 6 Insights from Chapter 7 Insights from Chapter 8 Insights from Chapter 9
Insights from Chapter 1

#1

The Euro is slightly higher against the yen. The Dow Jones Industrial Average is off 18 points in active trading. A Chinese airline loses millions of dollars with derivatives. Following the Bank of England's decision to lower its base rate, monthly mortgage payments are set to fall.

#2

Financial markets have been around since the beginning of mankind. They have evolved over time, and today, they are handled computer to computer with minimal human intervention.

#3

Financial markets serve the same basic functions: price setting, asset valuation, arbitrage, raising capital, commercial transactions, investing, and risk management.

#4

The figure of $4. 5 trillion for 2011, which is the amount of money that was lent in that year, represents only a single year’s activity. If all financial activities were to be included, the total size of the markets would be much larger.

#5

The growth of finance can be measured by the value of cross-border financing. Cross-border finance is not new, and has been growing since the 1990s. In 2013, the total stock of cross-border finance was more than $52 trillion.

#6

Financial markets grew rapidly during the 1990s. The expansion of financial-market activity was halted in 1998 in response to banking and exchange-rate crises in a number of countries.

#7

The 1990s saw a change in pension policies in many countries, as well as an increase in financial assets. Stock and bond market performance was good throughout the 1990s, and risk management became more widespread.

#8

The driving force behind financial markets is the desire of investors to earn a return on their assets. Investors can be divided into two categories: individual investors and institutional investors. Individual investors control a small proportion of financial assets, while institutional investors account for most of the trading in financial markets.

#9

The fastest-growing institutional investors are investment companies, which combine the investments of a number of individuals to achieve particular financial goals in an efficient way. Mutual funds and unit trusts are investment companies that accept an unlimited number of individual investments.

#10

Algorithmic trading, also known as high-frequency trading, has expanded dramatically in recent years as a result of increased computing power and the availability of low-cost, high-speed communications.

#11

Financial markets exist in every country. The more investors that are available in a given market, the more liquid it becomes. The more transparent, reliable, and secure the market is, the more people will trade there.

#12

The speed of change in the financial markets has been accelerating as market participants struggle to adjust to increased competition and constant innovation. Deregulation and liberalization have led to consolidation, and many investors take a global approach.

#13

The following chapters examine the most widely used financial instruments and discuss the way the markets for each type of instrument are organized. Chapter 2 establishes the background by explaining the currency markets, where exchange rates are determined.
Insights from Chapter 2

#1

The foreign-exchange markets underpin all other financial markets. They directly influence each country’s foreign-trade patterns, guide the flow of international investment, and affect domestic interest and inflation rates.

#2

The amount of trading decreased in the late 1990s because the introduction of the euro eliminated all exchange-market activity among European currencies.

#3

The four markets that trade in foreign exchange are the spot market, the futures market, the options market, and the derivatives market. The spot market allows you to buy currencies for immediate delivery. The futures market allows you to lock in an exchange rate at certain future dates by purchasing or selling a futures contract.

#4

Swaps, forward rate agreements, barrier options, and collars are all derivatives that allow users to limit their exchange-rate risk.

#5

Foreign-exchange trading is closely linked with the trading of securities, particularly bonds and money-market instruments. Investors who believe a particular currency will appreciate will not want to hold that currency in cash form, because it will earn no return. Instead, they will buy the desired currency, invest it in highly liquid interest-bearing assets, and then sell those assets to obtain cash at the time they want to sell the currency itself.

#6

There are four types of participants in the foreign-exchange markets: exporters and importers, investors, speculators, and governments. Exporters and importers need to convert their foreign-currency earnings into their home currency. Investors buy and sell currencies solely to profit from anticipated changes in exchange rates.

#7

The currency markets are global, and most trading occurs in the interbank markets, among financial institutions which are present in many different countries. The amount of average daily trading in April 2013 was 250 percent higher than it was in 1998.

#8

The pattern of currency futures trading is different from that of exchange-rate futures. Exchangerate futures were invented at the Chicago Mercantile Exchange, and for many years it and the Brazilian exchange in São Paulo were the main exchanges on which currency futures were traded.

#9

The worldwide trading of currency futures peaked at 99. 6 million contracts in 1995. It then declined as investors preferred derivatives that are not traded on exchanges, such as forward contracts and swaps.

#10

The most widely traded currency is the US dollar, which has accounted for 40 to 45 percent of all trading since the first comprehensive survey in 1989. Only about 4 percent of all trades involve neither US dollars nor euros.

#11

The London market is unusual among currency-trading centers in that its own currency, the pound sterling, has a minor role in the market. The most commonly traded currency pair in London is the US dollar and the euro, accounting for one-third of all trading.

#12

Trading in emerging-market currencies is a tiny share of total daily trading. Almost all of this trading involves exchanges between the dollar and currencies from eastern Europe, Asia and Latin America.

#13

When two parties have agreed to trade currencies, they turn to banks to arrange the movement of whatever sums are involved. The risk of a bank failing arises from the fact that trading often occurs across many time zones.

#14

The mechanism whereby real interest rates affect exchange rates is called covered interest arbitrage. To understand covered interest arbitrage, assume that an investor in the UK wishes to invest £100 risk-free for one year, and can do so with no transaction costs.

#15

Covered interest parity is when an investor is able to earn a higher profit on US bonds than on British ones. This is because many investors will try to sell pounds for dollars in the spot market and dollars for pounds in the forward market to invest in the United States instead of the UK, which causes the pound to fall in the spot market and rise on the forward market.

#16

There are three main types of exchange-rate regimes: fixed, semi-fixed, and floating. Each has its advantages and disadvantages. The most common type of fixed-rate system is the gold standard, which was introduced by the UK in 1840 and adopted by most other countries by the 1870s.

#17

All fixed exchange rates have the same weaknesses. As long as people are free to move money into and out of a country, interest rates must rise high enough for investors to want to hold its currency because they can earn a attractive return.

#18

A fixed exchange rate also creates a