Running head: BUSINESS AND MANAGEMENT 1

Title: Evaluate Finial Markets, Securities, and institutions along with associated

risks.

Your Name

Institution Name (University at Place or Town, State)

BUSINESS AND MANAGEMENT 2

Answer of Q.1

Financial enginerring is the the applications of mathematical tools, techniques, formulas to solve

financial crisis and problems. Financial engineering is used for introducing new products,

innovative change in the existing products etc. it uses knowledge and information from the

different field of study like statistice, information technology , economics etc,. Derivative

security is an instrument whose value is totally dependent on the value of another instrument or

assets. As it names Derivatives implied that these securities derived their value from the other

assets.

Assets determine the material welfare and well-being of economy of a country. Benefit can be

gained from the development of new products through financial engineering and efficeient

utilization of financial assets.Finacnial engineering allows modification in risk and patterns of

traditional securities like shares, bonds , and stocks etc. It allows redistribution osecurities risk

to those people who are interesting and more inclined to them. Redistribution of risk in the

financially engineered securities worth more than the undelying assets.

Mortages have high risk of repayment and there is high chance of to be a defaulter. Here

fincacila engineering by pooling mortgaes and generating Securities backed by mortage allow

th investors to borne the payment of default and to earn huge profit.

Answer of Q.2

Capital market is a market in whicn the long term securities are brought and sold,

The conversion an asssets into financial and marketable securities to raise the proit or cash by

selling them to different investor is called securizartion. Securization needs the attendtion and

access of multiple investors. To attract potentioan investors in the Capital market , the financaial

marketbshoud be well developed and it should consist of the following items.

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1. Better system of financial reporting : Finacial reporting means disclosure of financial

statements, financial information and rsults and required information to the share holders

or stock holders, management, investors, rgukator and customers about an organization or

company for a specific period of usually one year. Exampples of financialreporting are

balance sheet, annual financial report, icome statement , cash flow statemet etc.

2. Well developed and efficient Investment banking industry

3. Well defined set of rules and regulations for financial transactions: specific rules and

regulation should available in a market to regulate the transaction placed in ..

4. Safe environment, ease system , low taxation , proper implementation of business laws,

no govt intervention in the business and economy.

Remove the obstacles and hurdles which enforces the people to deals through the financial

intermedeiareiea and providing them a platform for their fincacila activities alternately.

Borrowers and investors deals directly with each and due to this there will be a high risk

of fraudulent activities. Capital market should promote such mechanism which control the whole

process of securization and make a whole process easy and transparent.

To make speedy change in the field of securization capital market play its role to conduct

different sessions on the exploitation of borrower and high lights the importants factor due to

which securization is required.

Answer of Q.3

Financial intermediaries are the organizations or indicifaul that serves and acts as a middlemen

or agent between the two groups or parties in a business or financial transactions. Examples of

financial intermediaries are all types of banks, stock exchanges, brokers etc. Securitization is a

financial process or activity while financial intermediaries play the role of financial player .
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Finacnial intermediaries collect fund from the investors and used that funds to provide loans to

the borrowers. The use the money of investor and provide them profir and after making loan

payment to the borrowers financial insitutions or financial intermediaries charge them markup.

Simply we can say that financial intermediaries are obtaining profit from the capital of investors.

Investors and borrower both cannot directly with each other in such cases. Securization causes

dis intermediation and provides a plateform and soirces for the investors and particpants of the

market to skip or bypass the involvement of financial intermediaries like banks, broker etc, The

investors directly deals with the participant through their own approach without using the

banking channel. Securization is a technological and innovation in the financial market that’s

keeps the financial intermediaries away from some financial activity. Govt agencies also support

securization because it reduces the chance of exploitation of both the investors and the

borrowers. Online and digitilaztaion applications of finaccial intermediaries and financial

instituions taking the economy near to securization . due to the technology nowadays borrowers

and investors contact with each other direcly through nternet with out the help of any fiancila

sources like bank etc.

Answer of Q.4

The important innovation take place in 1980s is the secutization of large variety if different

financial products major changes occurs in interest rate, inflation rate, change in information

technology , technological progress, and regulation system. Due to the progress and process of

securilzation businesses of financial intermediaries are going to declines with the passage of

time. To keep themselves in the market with securization financial should increase short term

lending to the people . Financial intermediairies should involve themselves in such activities in

which the progress of securization is not too easily . The duration of short term loans is one year

less than one year and during this period its not possible to promote a securization. Securaization
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is a process in which all the aastes has been converted to a single form of security. Conversion of

asset means withdrawal of the deposits in multiple banks, sale of various properties etc. such

conversion into a single assets leads to less participation in the banking activity and less

dependency ion financial intermediaries. There are three important roles of financial

intermediaries which are mobilization of saving, disburse,ent of crdit and management of finccial

assets. We can say that financial intermediaries involve in three different types of activities and

each type of activity earns differently . so in securization a person sum up all the three things into

one and only assets and that can be easily managed with our the role of any fincacil institution.