CFA IFP Exam.docx

Active investment managers - correct answer Investment managers who try to predict which securities and assets will outperform or underperform comparable securities and assets and who act on their opinions by buying the securities and assets that they expect to outperform and selling (or simply not buying) the securities and assets that they expect to underperform adverse selection - correct answer Tendency of people who are most at risk to buy insurance, causing insured losses to be greater than average losses. ask price - correct answer the price at which a dealer or other trader will sell a security, typically qualified by a maximum quantity (size) *also called offer price asset allocation - correct answer The process to determine the proportion of a portfolio to hold in various asset classes or the proportion of a portfolio held in various asset classes. back office - correct answer Administrative and support functions necessary to run the firm, including accounting, human resources, payroll, and operations. Banks - correct answer Financial institutions that collect deposits from savers and transform them into loans to borrowers. bid price - correct answer the price at which a dealer or other trader is willing to purchase a security (typically qualified by a maximum quantity (bid size)) block brokers - correct answer Brokers who help investors who want to trade large blocks of securities. blockchain - correct answer A system of record-keeping that is maintained by independent computers in a peer-to-peer (decentralised) network. Brokerage Services - correct answer Trading services provided to clients who want to buy and sell securities; they include not only execution services (that is, processing orders on behalf of clients) but also investment advice and research. Brokers - correct answer Trading services providers who act as agents and, in exchange for a commission, arrange trades by finding sellers for their clients who want to buy and buyers for their clients who want to sell. buy-side analysts - correct answer Analysts who work for organisations, typically a type of institutional investor, that buy securities. They analyse data about companies and the markets in which they operate and review potential investments. buy-side firms - correct answer Institutional investors and investment managers who purchase investment products and services from sell-side firms. Capitalism - correct answer An economic system that promotes private ownership as the means of production and markets as the means of allocating scarce resources. clearing - correct answer All activities that occur from the arrangement of the trade to its settlement. clearing houses - correct answer Trading services providers that arrange for final settlement of trades. credit rating agencies - correct answer Investment research service providers that specialise in providing opinions about the credit quality of bonds and of their issuers. cryptocurrency - correct answer A digital currency composed of encrypted data that acts as a medium of exchange. custodians - correct answer Typically, banks and brokerage firms that hold money and securities for safekeeping on behalf of their clients. Data vendors - correct answer Investment research service providers of historical and real-time data about companies and market conditions. dealers - correct answer Trading services providers who participate in their clients' trades and stand ready to buy or sell when their clients want to sell or buy, providing liquidity and profiting when they can buy securities for less than they sell them. Also called market makers. depositories - correct answer Typically, banks and brokerage firms that are regulated and act not only as custodians but also as monitors, playing an important role in preventing investment fraud. Deposit-Taking Institutions - correct answer Financial institutions that take deposits, such as banks; also called depository institutions. direct finance - correct answer When providers and users of capital interact, the providers usually have a direct claim on the users (e.g., right to certain assets and earnings generated by the user). See also direct investments. endowment funds - correct answer Long-term funds owned by non-profit institutions. ethical dilemmas - correct answer Situations in which values, interests, and/or rules potentially conflict. ethical standards - correct answer Principles that support and promote desired values or behaviours. ethics - correct answer A set of moral principles, or the principles of conduct governing an individual or a group. financial assets - correct answer Claims on other assets; for example, a share of stock represents ownership in a company or a claim to some of the company's assets and earnings. financial capital - correct answer Money provided to individuals, companies, and governments to finance their needs. Financial Institutions - correct answer Financial intermediaries, such as banks and insurance companies, whose role is to collect money from savers and to invest it in financial assets. financial intermediaries - correct answer Organisations that act as middlemen between those who have money and those who need money. financial markets - correct answer Places where buyers and sellers can trade securities; also called securities markets or capital markets. financial planners - correct answer Investment professionals who help their clients set their financial goals and determine how much money they should save for future expenses and/or how much money they can spend on current expenses while still preserving their capital. financial services industry - correct answer Industry that offers a range of products and services to those who have money to invest and those who need money and help channel funds between them. fintech - correct answer Refers to technology-driven innovation in the financial services industry, and can also refer to companies — often new, start-up companies — involved in developing these technologies and to the wider sector they are a part of. foundations - correct answer Grant-making institutions funded by gifts and by the investment income that they produce. fraud - correct answer Intentional deception, such as deliberately causing or falsely reporting losses to collect insurance settlements.