Reference no: EM133131131

Below is a list of topics to review. Please make sure that you can explain your answer and not use bullet form answers.

Be able to explain / distinguish between the following terms. In each case think of examples to elaborate on your answer.

• Debt and Equity Markets, Money Markets, Capital Markets, Describe what these markets are, give examples of assets traded in these markets and refer to characteristics of these assets. Know which financial intermediaries would buy money market or capital market securities and why?
• Primary and Secondary Markets (Describe what these markets are for, give examples and explain the relevance and the importance of each.
• What is the difference between dealers, brokers, speculators, and hedgers. What do market makers do and why are they important?
• OTC and Exchanges What are the important differences between the OTC markets and Organized Exchanges. What type of assets get traded in them.
• Spot/future/Forward Contracts, Options (Call /Put Options) and Credit Default Swaps. Know what these contracts are, what are they used for and what are the main differences between them.
• Describe and distinguish between Eurocurrency markets, Eurobond markets and Foreign bonds and Euro banks. Explain what these terms imply. Give examples and refer to their characteristics and important differences. Be familiar with some general factors that have contributed to their emergence.
• Know what is meant by Asymmetric Information and the Principal Agent Problem. Be able to distinguish between Moral Hazard and Adverse Selection. Know how the problems of adverse selection and moral hazard can affect outcomes and what can be done to reduce their impact. ( Think of examples of each and some possible responses /or solutions to address them)
• Know what is meant by securitization, what are some examples of securitization and what might be the advantages of securitization of mortgage (MBS) to the banks and lenders and to the investors. What might be the disadvantages associated with the process.
• Be able to distinguish between Direct and Indirect Finance. Why is there a need for financial intermediaries?
• What is meant by the Shadow banking system? What is meant by Sovereign Wealth Funds?
• What were some of the factors that contributed to the Financial Crisis and in what way?
• What is meant by "too big to fail"? What kind of problems does it create? What are some policy suggestions to deal with these problems?