Financial Innovation in Capital Market

2012 edition Pride & Ferrell William M. Pride Texas A & M University O. C. Ferrell Univesity of New Mexico brief contents Part 1: Marketing Strategy and Customer relationships 1 1. An overview of Strategic Marketing. 2 2. Planning, implementing, and Controlling Marketing Strategies 30 Part 2: environmental Forces and Social and ethical responsibilities 61 3. the Marketing environment 62 4.

Another problem connected to the securitization of loans is the fact that the required off-balance sheet transactions increase the difficulty of determining a company’s true leverage. While off-balance sheet transactions are not necessarily a bad thing, they do disguise the true debt of a company in that they make it appear as if the obligation to repay the security investors falls on the SPV rather than the originator (Pala). Furthermore, a movement of assets to an SPV can result in the appearance of a reduction of leverage, which may make a company appear more attractive to investors, or in the case of a bank, allow them to decrease their capital requirements when they have not in fact de-levered and have simply moved items off of their

Many modern nations have pursued a path to greater and greater deregulation over the last decades in an effort to make their countries more competitive in the global market (Janow, 1996). This level of competitiveness has undoubtedly led to significant advances in product innovations from the private sector. Examples some innovations that occurred in the last ten years through deregulation of the financial sector include such items as debit cards, interest

Describe the characteristics of different types of debt securities and be able to price them. Describe different theories of how interest rates are determined and explain the relationship between the term to maturity, risk, and interest rates. Understand the mechanics and conventions of the foreign exchange market and the motivation of different participants in trading foreign currencies. This involves:  Reading, interpreting and transposing FX quotations.  Calculating cross-rates.  Identifying the factors that determine the value of a currency Understand the characteristics of derivatives instruments (futures and options contracts), the different motivations for their use and how they are traded. Specifically you should  Recognise which types of futures / options contracts to use to hedge various risk exposures  Appreciate the various risks involved in trading derivative instruments  Describe the factors that determine the pricing of derivative instruments. Discuss and write about the links between the theory of financial markets and

Members of the list must have $10 billion in market capitalization, spend at least 2.5% of revenue on R&D and have seven

The move also provided a stiff competition between the Non-banking financial Institutions and the traditional banks where they were offering services which were traditionally limited to the traditional banks only. The rules that governed the banks were lifted and banks had the freedom to venture into other financial services which were not their core business. The rapid transformation of the global financial system resulted into a hive of financial investments due to the belief that the financial system was capable of controlling itself without being closely monitored.

Mutual fund Industry was introduced in India 1963 with the formation of Unit Trust of India. During the last few years many extraordinary and rapid changes have been taking place in the Mutual fund industry. Indian economy is highly developing. The development is taken place due to the growth in the financial system.

The deregulation of finances and innovation by investors has created a highly technological financial system that is freely accessed on a global basis. The deregulation of the financial sector and the internationalization of financial markets are now made effortless through the ability to use instant telecommunications.

Technological advancement has had a gigantic effect in the banking industry. Over the past few decades, the financial services industry has changed considerably with banking transforming from the pen and paper method to the computers and internet method. The pen and paper method took weeks or even months for the transaction to be eventually completed, and then the dramatic introduction of the computer and internet method which changed that time frame to only a matter of seconds to be completed, which reduced the amount of time and labor needed to complete a transaction significantly. Banking is considered one of the most important economic sectors with it being severely influential and responsive to any little change, whether it is domestic or international. Some extreme changes that were brought about by the development of this new technology turned into a globalized nature for the financial services industry. One stroke of a key on a computer could and would change a person 's life extensively or even have a global impact. The new technologies that were created and introduced changed how the consumers managed their money from that time on. Technology has helped to protect peoples’ hard earned money and make it much more impossible for people to be able to write out bad checks or even holding up a bank. The advancement in technology however, also came with some security risks as most things do, that could affect the money that people trusted with the bank and

The use of derivatives has increased over the recent years because they are an integral part of the economy. They help firms to manage financial risks that threaten revenue, cost of goods sold and various expenses. Derivatives have existed long for centuries and their recorded history dates back to the sixth century, B.C. (Donohoe, 2015). During this time, goods and services were used in the exchange, however, this proved to be difficult because it was hard to coordinate harvest times for different goods all year round. During the 1800s futures were used in the London exchange to protect against price fluctuations. In this paper, I will examine derivative securities, discuss their roles in the financial market and discuss the role of

It is estimated that about 75% of American companies use derivatives. The main risk remains that most companies do not monitor their position frequently (Operational) and only few really understand the instruments (Intellectual). Moreover, as an off-balance-sheet item it reduces the public awareness of such items (accounting).

Financial innovation is constantly reshaping the world. However, the subprime crisis since 2008 has drawn great attention all over the world, highlighting the limitations and hazards of financial innovation. The financial turmoil began in the United States, at which time, the subprime mortgage lenders were going bankrupt, investment funds were forced to close and the value of the stock declined significantly. According to Sánchez, the Deputy Governor of Mexican Central Bank, the subprime crisis since 2008 was mainly caused by the phenomenon that the innovation of many complex financial instruments were extensively used without appropriate regulation (Sánchez, 2010). As financial innovation involves a large number of products and cannot analyze all of them, this essay will only focus on MBS, which has been one of the most important and widely-used financial innovation since the 1960s. By the end of 2006, the total amount of MBS was $6.4 trillion, 49% larger than the market for Treasury debt (Fabozzi, Bhattacharya and Berliner, 2010).

In today’s competitive world, I find financial services sector has maximum growth and potential as compared to other sectors. It is widely recognized and considered it as a short and long-term investment.

12 years ago, Warren Buffett warned that derivatives were “financial weapons of mass destruction” (Lenzner). 6 years after he made this statement, derivative traders helped induce the biggest financial crisis in America since the Great Depression. Derivatives are highly complex financial instruments that have fundamentally changed the way we perceive finance. Trading these derivatives has caused a financial revolution that has generated both a huge amount of potential, and an an equally huge amount of risk. Derivatives, in a nutshell, are highly complex financial instruments whose values are dependent on, calculated

Also as the renovation of technology and the continuous development of the world’s financial markets, the various financial derivatives have been promoted. Meanwhile, the integration between different financial sectors gradually strengthened. The original separated operation and supervision mechanism hinder the innovation of financial system and enhancement of service efficiency. ICBC (London) is facing the level of competition in the financial sector will become more intense, which requires the development under the British FSA’s supervision. It must keep the pace of the international financial banks. That means the mixed operation will be the future development direction.