Exam 2: Financial Institutions, Financial Intermediaries, and Asset Management Firms

Financial intermediaries get funds by issuing financial claims against themselves to market participants, and then investing those funds. The investments made by financial intermediaries can be in ________.

Asset management firms receive their compensation ________ from management fees charged based on the market value of the assets managed for clients.

Describe three of the services that can be provided by financial enterprises.

With this type of liability, the timing of the cash outlay is known, but the amount is uncertain.

The term hedge fund is associated with common characteristics. Which of the below is NOT one of these common characteristics?

Financial enterprises, more popularly referred to as financial institutions, provide a variety of services. Which of the below is NOT one of these?

Many large manufacturing firms have subsidiaries that provide financing for the parent company's customer. These financial institutions are called captive finance companies.

People who work for financial intermediaries (such as a commercial bank and an investment company) include investment professionals who are trained to analyze financial assets and manage them.

An important risk that is often overlooked but has been the cause of the demise of some major financial institutions is value-at risk.

Which of the following statements is FALSE?

________ is the risk to a financial institution's economic well-being that results from an adverse movement in the market price of assets it owns.

For Type-IV Liabilities, both the amount and the timing of the liabilities are known with certainty.

The commercial bank by issuing its own financial claims transforms a longer-term asset into a shorter-term one by giving the borrower a loan for the length of time sought and the investor/depositor a financial asset for the desired investment horizon. This function of a financial intermediary is called ________.

In regards to Type-IV Liabilities, there are numerous insurance products and pension obligations that present uncertainty as to both the amount and the timing of the cash outlay.

________ is a broadly used term to describe several types of risk.

Liquidity risk is the risk that a counterparty in a trade fails to satisfy its obligation.

Liquidity risk in the context of settlement risk means that the counterparty can eventually meet its obligation, but not at the due date.

There is no universally accepted definition to describe the 9,000 privately pooled investment entities in the United States called ________ that invest more than $1.3 trillion in assets.

Some nonfinancial enterprises have subsidiaries that provide financial services. These financial institutions are called ________.

Funding liquidity risk is the risk that the financial institution will be unable to obtain funding to obtain cash flow necessary to satisfy its obligations.