Bloomberg: Fundamentals of Finance

What is an investment bank?

Acts as match maker linking companies who need investment with buy side investors

Central Bank

Government owned institution that manages a country's currency

Reputational risk

Risks associated with the reputation and good standing of a venture, leading to the loss of customers and profit

Foreign Exchange

The buying and selling of two currencies

What are the sell side institutions and who do they serve?

They serve Companies and they are: Commercial Banks, Investment Banks, Credit Rating Agencies, Brokers

What are the buy side institutions and who do they serve?

They serve Households and they are: Retail Banks, Insurance Companies, Mutual Funds, and Pension Funds

What is a loan?

When you BORROW a specific amount of money for an agreed upon amount of time. Terms are decided by the lender.

Bond

a formal contract to repay borrowed money with interest at fixed intervals. Term decided by the borrower and can be traded.

Buyer's Market

a market in which there are more goods and services than people willing to buy them

Commodity

a raw material or primary agricultural product that can be bought and sold, such as natural resources

optimized risk

achieving the greatest award given the risk involved

futures contract

obliges traders to purchase or sell an asset at an agreed-upon price at a specified future date

minimal risk

reducing the potential for loss

Liquidity Risk

risk associated with the inability to liquidate a security quickly and at a fair market price

Financial Risk

the likelihood of a company losing money on a business or investment decision

Credit Risk

the probability that the borrower will fail to pay some of the interest or principal

Operational Risk

the risk of loss resulting from inadequate or failed internal processes, people and systems, or from harmful external events

derivates

the transfer of risk from one party to another