Finman Notes 8272013 | Financial Markets | Futures Contract

Markets - the place where the exchange of goods and services takes place at a mutually agreed price or value

- affected by internal and external factors - a price discovery mechanism and intermediation process Financial Markets - venue for exchange between suppliers of capital and users of capital. Users may be suppliers and suppliers may be users of capital. - financial intermediary (banks, stock market, insurance companies, investment banks, etc.) - capital formation process - reduces cost of information and research - users (spenders) and providers (savers) of capital congregate Savers: (you help in capital formation) - putting money to banks - individuals, businesses Spenders: - individuals, businesses, governments, other entities Financial intermediation has costs (interest payments) Structures Capital Market - where long-term capital funds in debt and equity are transacted ex. Debt Capital (Bond payables), Stock market (public offerings of corporations) Money Market - where short-term capital is obtained (over-the-counter) ex. Consumer loans, credit cards, micro-finance Debt Market (domestic and foreign), Equities market (stocks), Derivatives Market (Futures, Forwards and Options) Futures - contract by which you can fix with a provider funds based from future deliveries at an agreed price (commodity futures)

risks. future earning potential. interest managed by central bank.Brand equity. technological (PREST) -Global issues (geopolitics). returns and cash flows. economic. etc. government monetary policy e.take a position now (buying or selling now to anticipate price differences in the future) for speculation of future prices for arbitrage .exercising an option by paying a percentage of the total price right now. inflation) ---> BSP manage bank reserve requirements to affect interest rates Industry factors . Government intervention (government fiscal policy e. threat of substitutes. organizational capital.environmental factors e.rivalry among firms. having the right but not the obligation to exercise the option (not the same as down payment) External factors that drive the behavior of financial markets . track record. bargaining power of buyers. liquidity. FX. Financial management objective . threat of new entrants.g.minimize risk and maximize return Tangibles and Intangibles Components of Goodwill (future earning power) . taxation & government spending. social. and bargaining power of the suppliers Impact of Factors on Financial markets . market dominance. international trade).sell something you don't have right now Options .g. location.g. human/intellectual capital .Derivative instruments are for hedging . political/regulatory environment. International finance & trade (capital & fund transfers.taking advantage of price differences in different markets Sell short .

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