fin 360
I am familiar with the basic issues in fintech that are legal for now, but will lead to loss of trust in finance, litigation and future litigation
true
Many New Orleans residents did not have home insurance because the premiums had increased
true
On average banks started the 2008 financial meltdown with half their assets off the balance sheet because it was legal to do it
true
Procrastination and financial illiteracy are personal finance topics examined by behavioral finance
true
The dual mandate of the Fed is employment maximization and stability of prices
true
The greatest strength of bitcoin is its underlying blockchain technology
true
When buying a car
we need to justify the needs vs wants, advertising and social pressure it is not a good idea to borrow to buy a car because of depreciation we need to consider budget and needs even if it is a "deal"
Prospect theory explains
why we fear losses more than become happier with gains
The causes of the 2008 crisis include
deregulation conflicts of interest of rating agencies moral hazard by banks structural problems in supply and demand of safer securities
Behavioral finance examines
emotional and cognitive biases first studied by psychologists
The dual mandate of the Fed is
employment maximization and price stability
In buying-on-margin and short-selling there is a broker call if
equity to assets maintenance margin is violated
Future regulation of high frequency trading is likely to
exclude protections for "dark pool" investors include protections for retail investors consider academic research findings
Supporting discussion answers with reference to at least course materials is
important to help move discussion forward important to maximize participation points important to facilitate understanding by others important to avoid plagiarism
The origin of behavioral finance is
in psychologists in Israel trying to understand the world
The trend world-wide is for central banks to be
independent from executive powers
On average banks started the 2007-2008 crisis with about half their assets off the balance sheet because
it allowed them to minimize capital requirements it was legal it allowed them to maximize profits
Taking notes while watching videos such as the 2008 Financial Meltdown video is important because
it helps maintain focus and prepare for discussion, test questions, and non-anonymous zoom poll questions
The problem with GDP is that
it is a quarterly measure
I always consider, whether it is a CFA case or not, the ethical decision making framework of identification of key information, duties and conflicts, and neutralize negative situational influences with training, disclosure and consultation with compliance officers
true
The depository institutions are
commercial banks, credit unions, and thrifts
Which are the rationalizations for Immoral Behavior as per CFA?
ALL CORRECT Deny responsibility, injury and victim The ledger Social Weighting
Behavioral finance experts have been awarded Nobel Prizes since the 60s
False
In a recession GDP declines by more than 10% and lasts longer than 3 years
False
The discussion of high frequency trading includes those that claim it has decreased liquidity vs those concerned about less democratization of capital markets
False
When things change, people may underreact because of representativeness, or overreact because of conservatism
False
When I make financial decisions
I consider my needs, including safety savings, before wants
When I receive a credit card offer
I pay close attention to fee conditions
The macroeconomic variable that most moves the markets and guides decisions by the Fed is
PMI
Robo-advisors in wealth management and investments are already common in
Peer-to-peer lending platforms
Fintech is disintermediating finance, but it is expected to co-exist with traditional institutions as competitor, partner or even under the same roof because of complementary strengths
True
Glass-Steagall Act fully separated investment and commercial banking between 1933 and 1999, and its repeal exacerbated the risks of the 2007-2009 Great Recession
True
Heuristics, or rules of thumb, make decision-making easier but can sometimes lead to suboptimal investment decisions
True
Keeping a budget of expenses is an important step to financial health
True, even if your income is very limited
Equity to assets maintenance margin is defined as
Variable value of shares minus constant debt, all divided by variable value of shares (price x number of shares) in buying on margin
I have worked on buying-on-margin and short-selling problems asking questions in my small group
Yes, and I have contact information other than email
Moral hazard refers to
a type of ex-post information asymmetry problem not having an incentive to limit risk because somebody else bears the additional potential losses not having an incentive to limit risk aiming to increase profits for some
The 2007-2009 Great Recession was caused by
all are correct deregulation lack of financial literacy moral hazard
The monetary policy tools of the Federal Reserve are
all correct changes in Fed rate target changes in bank capital reserve levels discount-window, being the lender of last resort
Investors keep a close eye on inequality indexes beyond GDP and other macroeconomic variables such as PMI because
all correct increases in inequality increase political risk increases in inequality lead to deterioration of other variables increases in inequality increase investment risk
Which are common negative situational influences?
all correct obedience conformism incentives-framing incrementalism overconfidence
To support crisis economies, the Fed
all of the above buys treasury securities from member banks, increasing their access to cash has greater access to cash, Fed as lender of last resort and cash in exchange for treasuries that helps lower interest rates is likely to change reserve levels if the crisis is severe and motivated by deregulation
One solution to the variations in marketing of credit card fees depending on income could be
all of the above increase financial literacy of general population increase awareness of different ways fees are presented regulate to anticipate class action litigation
The most heavily regulated financial institutions are the depository institutions because they
all of the above take deposits transmit monetary policy provide maturity inter-mediation
Moral malleability is defined as
all of the above temporary flexing of moral standards with a purpose of justifying (consciously or unconsciously) immoral choices and behavior when it is legal in the short or long run
The Fed is a hybrid structure because
all of the above the Fed Board is an independent government agency the regional Feds are private corporations member banks own stock of the regional Feds
Adverse selection refers to
an ex-ante information asymmetry problem knowing more about ourselves than the other party does
Short-selling involves
believing stock prices will fall
Buying on margin involves
borrowing cash to buy shares
Fedcoin would change the value of other cryptocurrencies based on blockchain technology given the support from
both Fed and Treasury
We need to understand the limitations of credit score algorithms that use digital footprint in order to anticipate
both litigation and regulation
Behavioral finance assumes rational behavior
false
Both in the case of buying on margin and short-selling, investors need to observe maintenance margin or assets to equity ratio
false
Buying on margin strategy involves borrowing shares to sell high first and then buy low to repay
false
In short-selling equity considers fixed debt, while in buying-on-margin, the debt is shares that are owed and variable in price
false
Limits of arbitrage means we can make money without incurring risk
false
Moral hazard is a term coined for banks
false
Moral hazard refers to an incomplete form of risk and return trade-off where there is no upside for extra-risk because someone else bears the potential losses
false
When we choose to repay debt over a longer period of time our monthly payments and interest are smaller
false
The advocates of high frequency trading consider
more over-the-counter trading higher liquidity for financial securities faster execution in market-hubs
Information asymmetries
refers to an array of obstacles to financial contracting can be ex-ante or ex-post
Generalizing recent outcomes is an example of
representativeness
The big umbrella-term for obstacles to finance contracts is
one of these two: information asymmetries moral hazard
Too-little diversification is an example of
overconfidence
Not selling losing shares at the end of the calendar year is an example of
prospect theory
When gains make us less happier than the increase in unhappiness when we lose the same amount of capital, we have evidence of
prospect theory
PMI estimation follows a survey to
purchasing managers in private manufacturing companies because they are credited with being accurate forecasters of market confidence
The regional banks appoint a percentage of Fed directors because
the Fed was designed as a system with check and balances
Behavioral finance is
the explanation for market bubbles
The detractors of high frequency trading discuss
the insufficient regulation of financial innovations
When I take a loan, if I choose to repay in a longer period of time
the monthly payments will be lower, but interest payments higher
High frequency trading refers
the need for powerful algorithms the need to trade close to market servers trading at the speed of light
When the Fed backed the rescue of Bear Stearns in Spring 2008
they punished moral hazard by pricing shares at $2
"Law of small numbers" refers to representativeness, when people put too much weight on recent experience
true
Buffett does not think markets are rigged, despite HFT
true
Buying on margin is a strategy investors follow when stock prices are expected to rise
true
Financial institutions include mutual funds, banks, insurance, hedge funds and others
true
Fintech is changing finance from cradle to grave, all types of services
true
