FINANCIAL MARKETS (April 08, 2020)

BANKS
- institution licensed to receive deposits and make loans
- financial services provided: wealth management , currency exchange, safe deposit
boxes

Types:
1. Private Banking Institutions
- Commercial Banks
- Universal/ Expanded Commercial Banks
- Rural Banks
- Cooperative Banks
- Thrift Banks
* Savings & Mortgage Banks
* Private Development Banks
* Stock Savings & Loans Assoc.
2. Government Banking Institutions
- Landbank
- DBP (Development Bank of the Philippines)
- Philippine Veterans Bank
- Phil. Al-Amanah Islamic Inv. Bank

Types of Checks
1. Cross Check
- crossed with two parallel lines (whole check or left-hand corner)
- signifies it can only be deposited into a bank account
2. Post-dated Check
- issuer has stated a date later than the current date
- to secure payments
3. Stale Check
- presented to be cashed or deposited at a bank six months or more after the date
it was written
- can no longer be deposited
4. Manager's/Cashier's/Treasurer's Check
- issued by bank
- payable to a payee as indicated by the person who buys the MC
- often used in situations when the beneficiary does not accept cash or personal
cheques
5. Certified Check
- the issuing bank guaranteed that there will be enough cash available in the
holder's account when the recipient decides to use the check
6. Traveler's Check
- certified bank draft that travelers may use the same way they use regular paper
currency. Traveler's checks may be used in place for cas purposes in travels.

Float
- difference bet. bank's balance for a firm's account and the balance that the firm
shows on its book
1. Mail Float
* amount of customer's payments that have been mailed by a customer
but not yet received by the seller
* deposit in transit
2. Processing Float
* amount of customer's payments that have been received by the
seller but not yet deposited
3. Clearing Float
* amount of customers' checks that have been deposited but not yet
cleared
Kiting
- form of check fraud
- involving taking advantage of the float to make use of non-existent funds in a
checking or other bank account.
- checks are misused as a form of unathorized credit

DERIVATIVES
- business decisions are made in the presence of RISK
- a decision maker confront two types of risk
* Business Risk
* Financial Risk

Financial Risk
- our financial system is replete with risk
- also provides a means of dealing with risk in form of derivatives

Definition
-returns are derived from those of other financial instruments
- companies and individuals can trasfer any undesired risk to other parties

Derivative Markets and Instruments

- a security is a tradable instrument representing a claim on a group of assets
- on the first basis, the markets are known as cash market or spot market.

Types
1. Options
- right to buy (call) or sell (put)
- buyers pay a sum of money called price or premium (option price)
2. Forwards
3. Futures
4. Swpas