MindMap Gallery CFA I Reading 36
This is a mind map about CFA I Reading 36. It is very convenient to recite and check at ordinary times. They are all compiled based on personal understanding of the teaching materials. You can add or delete them according to your own review situation. I hope it can help you clarify your knowledge and improve your learning efficiency. I wish you all good luck in the exam~
Edited at 2021-04-04 14:56:06This is a mind map about bacteria, and its main contents include: overview, morphology, types, structure, reproduction, distribution, application, and expansion. The summary is comprehensive and meticulous, suitable as review materials.
This is a mind map about plant asexual reproduction, and its main contents include: concept, spore reproduction, vegetative reproduction, tissue culture, and buds. The summary is comprehensive and meticulous, suitable as review materials.
This is a mind map about the reproductive development of animals, and its main contents include: insects, frogs, birds, sexual reproduction, and asexual reproduction. The summary is comprehensive and meticulous, suitable as review materials.
This is a mind map about bacteria, and its main contents include: overview, morphology, types, structure, reproduction, distribution, application, and expansion. The summary is comprehensive and meticulous, suitable as review materials.
This is a mind map about plant asexual reproduction, and its main contents include: concept, spore reproduction, vegetative reproduction, tissue culture, and buds. The summary is comprehensive and meticulous, suitable as review materials.
This is a mind map about the reproductive development of animals, and its main contents include: insects, frogs, birds, sexual reproduction, and asexual reproduction. The summary is comprehensive and meticulous, suitable as review materials.
market organization and structure
financial market
functions
primary functions: transfer risks and assets
hedgers (manage risks), borrowers (obtain fund), investors (receive fair return), traders (obtain currencies, commodities, securities)
saving
borrowing
rate of return
if the rate of the return is too high, people tend to save and borrow less
if the rate of the return is too low, people tend to borrow rather than save
the total savings = total borrowing in an economy, the rate of equilibrium
risk management
insurance company (insurance contracts)
issuing equity
investment banking
exchange assets
swap contracts
utilizing information
assets
financial assets
securities
owernship
equity securities
represent ownership positions
common stock
preferred stock
will receive the dividends earlier than the common stock
warranties
gives a right to purchase the securities at a certain price
debt securities
the borrowed will be refunded
public vs. private
public traded securities
private traded securities
contracts
swap contract
exchange interests rates, currencies, securities in the contract
forward and future contract
sell an asset in the future at a certain price
future contract is a standardized contract with fixed price, characteristics, delivery time, etc.
option contract
gives the owner a right to buy or sell an asset
call option
gives the owner to buy an asset
put option
gives the owner to sell an asset
insurance contract
credit default swaps
an insurance contract in case the issuer defaults on its dividends payments
derivatives
currencies
issued by the central government
traded in the spot market with immediate delivery
real assets
physical assets
real estates
commodities
equipments
inventories
how to trade real assets
direct trade on physical assets relevant to a lot of management costs
indirect ownership methods
real estate investment trust (REIT), master limited partnership
buy the stock of the firm owning real estates
markets
sell different types of securities
primary market
newly issued securities, IPOs
investment banking services
indication of interests
indication of interests, the investment banks to navigate the willingness of investors to invest
book builder, the collectors of indications of interests
indication of interests influence the offering price
more willingness to buy, the prices up
as a result
underwritten offering, the investment bank agrees to buy whole shares of securities
best effort basis
not promise to take all
private placement
it's always a trap
low issuance cost and offer price compared with the public market
only qualified investors have access to it
problems: information transparency is low
dividend reinvestment plan (DRP)
use the dividends to reinvest / buy new shares with lower discount
secondary market
trade the already issued securities, London exchange
quote-driven market
the dealers maintain an inventory of securities
order-driven market
orders are executed by using trading rules
trade priority rules
pricing priority
the trade is given to the highest bid and lowest ask
secondary precedence rule
the trade is given to the non-hidden orders and the earlies requesting
pricing rules
uniform pricing rules
given uniform/same price
discriminatory pricing rules
limit price orders according to the arrival time
brokered market
brokers need to find a counterpart to execute the order
e.g. art work., real estate, etc.
traditional or not
traditional investment market
alternative market
time
spot market
immediate delivery
future, forwards, options
owns a right to trade at a certain price
maturity
money market
the maturity is less than one year
capital market
the maturity is more than one year
financial intermediates
brokers, dealers, securitizers, depository institutions, insurance companies, arbitrageurs, clearing houses
brokers vs. dealers
dealers own the assets, buy or sell from its own inventories
brokers
investment banks
help sell equity securities (stock, preferred stock, warranties) and debt securities to investors
give advise on mergers and acquisitions
exchange
London exchange
alternative trading system, electronic communication network, multilateral trading facilities.
primary dealer:
trade with the central bank that may influence the economy's money supply
securitizers
A mixed bag
securitizing a pool of assets and selling interests in the pool to the investors
decrease the funding costs for the assets
insurance companies
Probability of shorting, time value of money (inflation)
arbitrageurs
buy the assets from one market and sell them in another market
market regulation
if not
fraud and theft
inside trading
costly information
defaults on return to the investors
result in
low liquidity in the financial market
unfunded new/innovative ideas
economic declines
information
informational efficiency
this is where consulting/advisory services provide
the prices changes quickly in response to the new information, the estimates of the value of the securities
operational efficiency
capital can be allocated to the most productive use
where consulting firm works on
order execution and validity
dealer
bid price, ask price, and bid-ask spread
bid price: the price where the dealer buys, the ask price where the dealer sells, and the bid-ask spread is the compensation that the dealer receives
execution instructions
how to tade
market orders
trade immediately but not the best price
limit orders
limit the price in a range
marketable or aggressive limit orders
make a new market, inside the market
behind the market
far behind the market
validity orders
when to place the order
day orders, good til canceled orders, immediate or canceled orders, good-on-close orders, stop orders
stop sell orders, stop buy orders
clearing instruction
standardized instructions by clearing house or custodians
leveraged position
buy on a margin
borrow some capital from the broker to trade based on certain percentage of the equity
there is an initial margin requirement, and when the price reduces there is a maintenance margin requirement (minimum requirement of the equity percentage)
margin call
if the percentage of the equity blows the maintenance margin requirement
margin call price
= original price * (1-initial margin)/(1-maintainence margin requirement)