While the concept of Bitcoin may be new to some, this well-known cryptocurrency has been around for over a decade. Bitcoin (BTC) is one of many digital currencies that have become fairly common investment holdings among tech-savvy households. Proponents of cryptocurrencies argue that digital currencies are easier and safer, and come with better privacy, than … Read more
What is the financial system? A financial system is a set of institutions, such as banks, insurance companies, and stock exchanges, that allow the exchange of money. Financial systems exist at corporate, regional and global levels. Borrowers, lenders, and investors exchange current money to finance projects, whether for consumption or for productive investments, seeking a … Read more
Banking regulation Banking regulation is a form of government regulation that subjects banks to certain requirements, restrictions and guidelines, and is designed to create market transparency between banking institutions and the individuals and companies with whom they do business, among other things. Since regulation focuses on key factors in financial markets, it forms one of … Read more
Risk management and internal control in banks. What are internal controls? Internal controls are the mechanisms, rules, and procedures that a company implements to ensure the integrity of financial and accounting information, enhance accountability, and prevent fraud. Besides complying with laws and regulations and preventing employees from stealing assets or committing fraud, internal controls can … Read more
Bank management: retail, wholesale, investment banks. What is corporate banking? Wholesale banking refers to banking services sold to large customers, such as other banks, other financial institutions, government agencies, large corporations, and real estate developers. It is the opposite of retail banking, which focuses on individual clients and small businesses. Wholesale banking services include currency … Read more
Financial intermediation Financial intermediation is a productive activity in which an institutional unit incurs obligations on its own account for the purpose of acquiring financial assets by engaging in market financial transactions; The role of financial intermediaries is to transfer money from lenders to borrowers by mediating between them. What is a financial intermediary? A … Read more
Economic analysis of financial structure What is the financial structure? Financial structure refers to the mix of debt and equity that a company uses to finance its operations. This configuration directly affects the risks and value of the associated business. The company’s financial managers are responsible for determining the best combination of debt and equity … Read more
What is market efficiency? Market efficiency is a relatively broad term and can refer to any metric that measures the dispersion of information in a market. An efficient market is one in which all information is transmitted perfectly (everyone receives the information), completely (everyone receives the information completely), instantly (everyone receives the information once), and … Read more
Arguably the most important skill investors can learn is how to value stocks. Without this competence, investors cannot independently distinguish whether a company’s stock price is low or high relative to the company’s performance and growth prospects. What is an arrow? One share of the company represents a small ownership stake in the business. As … Read more
What is “risk and return”? In investing, there is a close correlation between risk and return. Usually, increased potential returns on investment go hand in hand with increased risks. The different types of risks include project-specific risk, industry-specific risk, competitive risk, international risk, and market risk. Yield refers to the gains and losses resulting from … Read more