Class 25 'Financial Institutions & the Securities Markets'

44 terms by carlingmatthews 

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Suppliers of funds

Households across Canada

Demanders of funds

business and government

Financial intermediaries

Commercial banks, trust companies, credit unions, life insurance companies and pension funds

Depository institutions

Chartered Banks, Trust Companies, Credit Unions/Caisses Populaires

Chartered banks

accept deposits, makes loans to business and consumers (Royal Bank, TD, CIBC)

Trust companies

administers estates, trusts, and pension plans (Canada Trust)

Credit unions and Caisses Populaires

member-owned

Non-depositary institutions

Insurance Companies, Pension Funds, Brokerage Firms, Finance Companies

Insurance companies

customers pay premiums on policies (Manulife, Sun Life, Great West)

Pension funds

employees and employers pay into pension plans to be used for retirement benefits (Ontario Teachers Pension Plan, 9.6% return since 1990)

Brokerage firms

buy and sell securities on behalf of their clients (ScotiaMcLeod, TD Waterhouse)

Finance companies

automobile, property

Insuring Bank Deposits - Canadian Deposit Insurance Corporation

is a crown corporation providing insurance for the deposits of Canadians up to $100,000

International Banking & Insurance

Many of the Canadian banks and insurance companies have large international operations (e.g. BNS in the Caribbean)

investment certificates

issued by corporations or governments that represent either equity or debt

Preferred shares

ownership of the company and a fixed dividend

Value of Shares

rised and falls with the fortunes of the company and market conditions (economy)

Common shares

ownership of the company, voting at the annual general meeting, electing the Board of Directors

Bonds

debt obligations of corporations and governments; Regular interest payments and the repayment of principal at maturity

Corporate bonds

secured (mortgage) or unsecured (debentures), convertible (into shares)

Government bonds

federal, provincial, municipal

What is the highest rating (lowest risk of default)

AAA

Mutual funds

pool investors' funds (e.g. all the banks)

Mutual Funds 2 Types of Coverage

General coverage of the market (Canada, US, Global, Europe) or specialized (growth, value, gold, high tech, healthcare)

Advantage of Mutual Funds

someone selects stocks, bonds, and other assets for you

Disadvantage of Mutual Funds

Management expense ratio (MER)

What generally outperforms mutual funds?

Exchange Traded Funds

Futures contracts

obligations to buy or sell commodities or currencies at a specific price at some point in the future

Options

contracts to buy or sell stocks or other financial instruments at a specific price at some point in the future

Institutional investors

professionals who manage other people's money

CFA

Certified Financial Analyst

Investment banks

help companies raise funds by buying securities and then selling them to the public (underwriting)

Stockbroker

account executives; trades securities for clients

2 Types of Market

Primary & Secondary

Primary market

new securities are sold (IPO)

Secondary market

organized stock exchanges; foreign exchanges; over-the-counter market

over-the-counter market

NASDAQ

foreign exchanges

New York Stock Exchange (NYSE), Tokyo Stock Exchange, Shanghai Stock Exchange

organized stock exchanges

Toronto Stock Exchange (TSX); TSX Venture Exchange

Bull market

describes conditions of rising stock or bond prices (optimism)

Bear market

describes conditions of falling stock or bond prices (pessimism)

What are markets driven by?

fear and greed

What is a strong predictor of both overall market performance and specific company performance?

Insider trading

Trends in Finance

Finance goes global; Risk management (credit risk, market risk, operational risk)

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