Essay About Overview Of The Financial World And Risksome Investment Profits

An Overview of the Financial World How to Allocate Resources to Maximize Profits
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An overview of the financial worldHow to allocate resources to maximize profitsPrice of money: interest rateWhat determines the interest rate?Fundamental interest rate =/= benchmark interest rate (federal state)“The money is cheap. The capital is expensive.” What does it mean?The interest rate is high/low. Determined by riskSome investment profits is risky → higher returnsFinancial WorldSell-side: sell financial securities (stocks, bonds, alternatives)Bond: low-risk-low-return financial security, fixed incomeStock (equity): Ownership of sth, relatively-high-risk-high-return financial securityAlternatives (structured products vs. standard products (bond, stock etc.), financial engineering, portfolio): get a CAIAHedge fundPrivate equityFuturesOptionsCommoditiesREITs (Real Estate Investment Trusts)FXFICC: Fixed income instruments, currencies, and commoditiesInvestment banks (broker-dealer)3 divisions: investment banking, sales and trading, researchStock (equity): share of stock represents fractional ownership of an asset e.g. oils, forest, in proportion to the total number of sharesIPO (Initial Public Offering): Initial (First time); Public (over 200 people); Offering (sale)Pros of being a listed company: earn more cash, promote image (been through the whole process of due diligence in order to be listed on a famous exchange e.g. SEHK (Stock Exchange HK) ) etc. (Blank cheque companies cannot be legally listed.)Due diligence (by investment bank): check the real ownership (investigation of a business or person prior to signing a contract, or an act with a certain standard of care)Investment banking: create securities and sell (primary market)Trading/ market maker: create liquidity (secondary market) (easiness of buying and selling things in the secondary market (without affecting the assets’ price) e.g. Bottled water has a higher liquidity than houses in Mata. Secondary market: traders, salesperson of financial securities (call and receive calls from investors)Analyst: stock research and make ratingBulge bracket (world’s most systemically important multinational investment banks and financial institutions; facilitates most global capital movement): Bank of America (Merrill Lynch), Barclays, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and UBS.Bulge bracket > boutiqueBoutique: Jefferies (American multinational investment bank), Rothschild (world’s largest independent financial advisory groups), Lazard (world’s leading financial advisory and asset management) etc. ——————————————————————————————————-Buy-side: Broker: Middlemen; individual persons who arrange transaction between a buyer and a seller Dealer: buyerMutual fund (an investment programme funded by shareholders that trades in diversified holdings and is professionally managed, restricted): Vanguard, State StreetLargest in the world: Ant FinancePension fundInsurance firmIndex fund: Low-risk-low-return but still riskier than bonds; normal return is the return you get from index fundETF (exchange-traded fund): MSCIHedge fund (an offshore investment fund, typically formed as a private limited partnership, that engages in speculation using credit or borrowed capital; cannot sell the product to ordinary investors, but high networks people (hnw); searching for abnormal return): Renaissance, GSAM, Bridgewater, Paulson & Co, AQRProprietary trading firms: Jane StreetQuant trading firms: Two Sigma, Tower Research, SAC (Point72)Trading strategic: momentum, mean reversion…Trading assets: equities, FICC, MBS…IPOs are targeted to the public but private equity/ hedge fund are not (lowest commitment:$10 million)Private equity (capital that is not listed on a public exchange. Within 200 people. Buy shares from the promising company): BlackstoneVCLBO: KKRMBODistressed DebtRetail TradersA private investment in public equity (PIPE) is a private investment firms, a mutual funds or another qualified investors purchase of stock in a company at a discount to the current market value (CMV) per share for the purpose of raising capital.