Banking and Financial Institutions

• The risk incurred by an FI when the maturities of its assets and

  liabilities are mismatched

  INTEREST RATE RISK
• The risk that promised cash flows from loans and securities held by

  FI’s may not be paid in full

  CREDIT RISK
• The risk that a sudden surge in liability withdrawals may require an FI

  to liquidate assets in a very short period of time and at less than fair

  market prices

  LIQUIDITY RISK
• The risk that exchange rate changes can affect the value of an FI's assets and liabilities denominated in nondomestic currencies.

  FOREIGN EXCHANGE RISK
• The risk that repayments from foreign borrowers may be interrupted

  because of restrictions, intervention or interference from foreign

  governments

  COUNTRY RISK
• The risk incurred from assets and liabilities in an FI’s trading book due to changes in interest rates, exchange rates and other prices

  MARKET RISK
• The risk incurred by an FI as the result of activities related to its

  contingent assets and liabilities held off the balance sheet

  OFF-BALANCE-SHEET RISK
• The risk incurred by an FI when its technological investments do not

  produce anticipated cost savings

  TECHNOLOGY RISK
• The risk that existing technology, auditing, monitoring, and other

  support systems may malfunction or break down

  OPERATIONAL RISK
• The risk that an FI may not have enough capital to offset a sudden

  decline in the value of its assets

  INSOLVENCY RISK
• provide a platform for customers to trade without the use of a broker.


  Specialized electronic trading securities firms
• often subdivided into large, medium and small categories and concentrate on servicing customers in a particular region


  Regional securities firms
• pool money from individual investors and other financial institutions to fund relatively small businesses


  Venture capital firms
• wealthy individuals who make equity investments; invested much

  more in new and small firms

  ANGEL VENTURE CAPITALISTS
• effect trades for customers on or offline without offering investment advice or tips


  Specialized discount brokers
• business entities whose sole purpose is to find and fund the most promising new firms


  INSTITUTIONAL VENTURE CAPITAL FIRMS
• They serve as brokers intermediating between fund suppliers and

  users

  SECURITIES FIRMS AND INVESTMENT BANKS
• contain bond and stock securities


  HYBRID FUNDS
• contain various mixtures of money market securities


  MONEY MARKET MUTUAL FUNDS
• contains common and preferred stock securities


  EQUITY FUNDS
• funds that contain fixed-income capital market debt

  securities

  BOND FUNDS
• these funds seek high returns using leverage, typically investing based on anticipated events


  more risky: market directional
• funds that strive for moderate, consistent returns with low risk

  RISK AVOIDANCE: market neutral
• Are a type of investment pool that solicits funds from wealthy

  individuals and other investors and invests these funds on their

  behalf

  HEDGE FUNDS
• has moderate exposure to market risk, typically favouring a longer-term investment strategy


  MODERATE RISK: market neutral or value orientation
• Pools the financial resources of individuals and companies and invest in diversified portfolios of assets


  MUTUAL FUND AND HEDGE FUND COMPANIES