12 Questions
What is the main difference between proprietary trading and trading for third parties?
In proprietary trading, the bank trades for itself, while in trading for third parties, it trades on behalf of clients.
What do sales designate in the context of banking?
Sales refer to trades conducted on behalf of clients by the bank.
What does the 'buy side' represent in banking terminology?
The clients, corporations, and asset managers who buy products.
Why might banks share inside information on corporate clients?
To inspire trades based on undisclosed information.
What kind of risks are primarily associated with activities like private banking and asset management?
Operational and legal risks
What do advisory services offered by banks typically involve?
Consulting services to corporations considering potential acquisitions
What is the repricing gap in the repricing model?
The difference between assets and liabilities that will be repriced in the future
How is refinancing risk defined in the context of interest rate risk?
The risk that the cost of rolling over or reborrowing funds will rise above the returns being earned on asset investments
In the context of the repricing model, what does a negative gap (RSA < RSL) indicate?
Exposure to refinancing risk
What is meant by a rate-sensitive asset or liability according to the text?
An asset or liability repriced at or near current market interest rates within a maturity bucket
What financial metric represents the value of an FI to its owners?
Net Worth
If an FI has a positive gap (RSA > RSL), what type of risk is it exposed to?
Reinvestment risk
Explore the different types of trading practices in banking, including traditional proprietary trading and trading for third parties. Learn about the distinctions between proprietary trading for self-gain and client-oriented trading in banks.
Make Your Own Quizzes and Flashcards
Convert your notes into interactive study material.
Get started for free
