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

There is considerable debate on the role of hedge funds in financial markets because of their size and their impact on financial markets that result from their investment strategies. On the positive side, it has been argued that they provide liquidity to the market.Nonetheless, there is a major concern. Identify and discuss this major concern.

There are various ways to categorize the different types of hedge funds. Mark Anson uses the four broad categories. Which of the below is NOT one of these?

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

The economic function of financial intermediaries that transforms more risky assets into less risky ones is called ________.

________ seeking the services of an asset management firm typically do not allocate all of their assets to one asset management firm firm.

Risk-arbitrage hedge funds have the broadest mandate of all of the four hedge fund categories.

A market directional hedge fund is one in which the asset manager retains some exposure to "systematic risk."

Which of the below statements is FALSE?

Most transactions made today are done with cash more so than payments mechanisms that use checks, credit cards, debit cards, and electronic transfers of funds.

The Global Association of Risk Professional (GARP) suggests classifying the major categories of operational risk into five categories according to the cause of the loss event. Name and describe two of these categories.

Financial intermediaries play the basic role of transforming financial assets that are less desirable for a large part of the public into other financial assets (their own liabilities) which are more widely preferred by the public. This transformation involves at least one of four economic functions. Which of the below is NOT one of these functions?