Overview of Finance

Study Notes

Finance is the management of money and investments for individuals, businesses, and organizations.
It involves the creation and management of financial instruments, such as loans, credit, and investments.

Time Value of Money: The concept that a dollar today is worth more than a dollar in the future due to its potential to earn interest or returns.
Risk and Return: The principle that investments with higher potential returns often come with higher levels of risk.
Diversification: The strategy of spreading investments across different asset classes to minimize risk.
Efficient Market Hypothesis: The theory that financial markets are efficient and that prices reflect all available information.

Stock Market: A market where companies issue and trade shares of stock to raise capital.
Bond Market: A market where companies and governments issue debt securities to raise capital.
Forex Market: A market where currencies are traded.
Derivatives Market: A market where contracts derivative of other financial instruments are traded.

Stocks: Represent ownership in a company and provide a claim on its assets and profits.
Bonds: Represent debt obligations and provide a fixed return in the form of interest.
Mutual Funds: A type of investment vehicle that pools money from multiple investors to invest in a diversified portfolio.
Options: Contracts that give the holder the right, but not the obligation, to buy or sell an underlying asset.

Commercial Banks: Provide basic banking services, such as accepting deposits and making loans.
Investment Banks: Assist companies in raising capital and advise on mergers and acquisitions.
Hedge Funds: Investment vehicles that pool money from high-net-worth individuals to invest in a variety of assets.
Central Banks: Regulate the money supply and set monetary policy.

Financial Planning: The process of creating a roadmap for achieving financial goals.
Budgeting: The process of allocating income towards various expenses and savings.
Investing: The process of putting money into assets that have a potential for growth.
Risk Management: The process of identifying and mitigating potential risks to financial well-being.

Finance involves the management of money and investments for individuals, businesses, and organizations, including the creation and management of financial instruments.

Time Value of Money: a dollar today is worth more than a dollar in the future due to its potential to earn interest or returns.
Risk and Return: investments with higher potential returns often come with higher levels of risk.
Diversification: spreading investments across different asset classes to minimize risk.
Efficient Market Hypothesis: financial markets are efficient, and prices reflect all available information.

Stock Market: a market where companies issue and trade shares of stock to raise capital.
Bond Market: a market where companies and governments issue debt securities to raise capital.
Forex Market: a market where currencies are traded.
Derivatives Market: a market where contracts derivative of other financial instruments are traded.

Stocks: represent ownership in a company and provide a claim on its assets and profits.
Bonds: represent debt obligations and provide a fixed return in the form of interest.
Mutual Funds: a type of investment vehicle that pools money from multiple investors to invest in a diversified portfolio.
Options: contracts that give the holder the right, but not the obligation, to buy or sell an underlying asset.

Commercial Banks: provide basic banking services, such as accepting deposits and making loans.
Investment Banks: assist companies in raising capital and advise on mergers and acquisitions.
Hedge Funds: investment vehicles that pool money from high-net-worth individuals to invest in a variety of assets.
Central Banks: regulate the money supply and set monetary policy.

Financial Planning: creating a roadmap for achieving financial goals.
Budgeting: allocating income towards various expenses and savings.
Investing: putting money into assets that have a potential for growth.
Risk Management: identifying and mitigating potential risks to financial well-being.