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24 Cards in this Set
- Front
- Back
- 3rd side (hint)
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A financial system comprises
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a range of financial institutions, instruments and markets; supervised by a prudential regulator
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Financial Instruments are issued .....
also equity, debt & derivatives |
by a party raising funds, acknowledging a financial commitment and entitling the holder to specified future cash flows.
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Equity is the
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sum of the financial interest an investor has in an asset; an ownership position
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Debt Instruments specify the _____ of a ________. (5)
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conditions of a loan agreement; issuer/borrower, amount, return, timing of cash flows, maturity date. Must be repaid
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Derivative instruments are
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a synthetic security that derives its price from a physical market commodity or security; mainly used to manage risk exposures
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Financial markets are
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arrangements where financial instruments are traded
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Main Aust financial markets (5)
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Equity market - ASX
Money market - s/t debt sec Bond market - l/t debt sec FX market - currency trading Derivative market - trading der |
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Direct financing involves
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the borrower issuing securities in a financial market for investors to purchase; funding obtained direct from the money and capital markets
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the borrower _______ __________
in a _________ ______ for _________ to purchase; |
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Indirect financing encompasses
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loans obtained through a financial intermediary eg an ADI
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Payment system ensures
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funds can flow easily between transactors.
Retail (low value) Wholesale (high value) |
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Retail payment transactions are made by __(2)___ and consist of __(7)___
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Households and businesses.
cash, cheques, DD, DC, debit cards, credit cards, BPAY |
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Wholesale payment transactions tend to be __(4)__ and are made through _______
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foreign exchange, money market, inter-bank and large corporate payments
real time gross settlement (RTGS) |
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Exchange settlement accounts are
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held with the RBA by banks and other providers of payment services to allow settlement of transactions in the payment system
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Real time gross settlement is used for the
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clearing and settlement of high value transactions
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Under RTGS non-cash transactions
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are settled immediately through exchange settlement accounts
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Financial institutions can be categorised as (4)
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1 ADI's
2 wholesale banking institutions 3 finance companies 4 fund managers |
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ADI's consist of (3)
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1 commercial banks
2 building societies 3 credit cooperatives |
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Wholesale banking institutions examples (2)
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1 commercial banks
2 money market corporations |
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Fund managers examples (3)
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1 superannuation schemes
2 insurance offices 3 unit trusts |
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Advantages of direct financing
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1 lower cost of funds
2 access to different funding markets |
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Advantages of indirect financing (4)
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1 maturity transformation
2 absorption of credit risk 3 economies of scale 4 asset transformation |
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Clearing involves
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the payment instructions being exchanged between providers of payment services
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Settlement involves funds
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being transferred between the exchange settlement accounts of each relevant institution
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A rate of __ percent ______ the cash rate is paid on ES balances
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0.25% below
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