Global economy has been growing for so centuries and years putting pressure on every single industry for a better work, pushing them for more improvements and innovations. As long as the companies’ need for fund raising came up to be the main point for further growth, it boosted financial markets to develop and find ways and means to help businesses to prosper by making money pools available for use. So now we have financial institutions that use various financial tools to work in between seller and buyer, or investor and company. It’s obvious that investor is a customer that has cash who is willing to put this money in a place where he or she could return the same amount of money and plus returns. There are high risk investment brokerage firms that find people ready to invest into the high risk companies or projects that supposedly bring high returns. These brokerage firms play a substantial role in this market segment, since most of the investors invest in stocks and securities through stock brokers. Usually investors rely on such brokerage firms to research the market so that they provide them with accurate recommendation about different securities.
In this paper I am going to analyze the principals of choosing high risk investments and risk, and then see how it could be minimized. I will check on regulatory and ethical issues of this market segment. Also I will create a scenario where high risk investment would be beneficial for the investors
Explain why investors may be attracted to high-risk investments such as exchange-traded derivatives, global funds, and other complex investment vehicles.
High risk investment, as a rule, is high return investment as we know based on what we studied so far during this class. Exchange-trad...
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...d-Frank Wall Street Reform and Consumer Protection Act now offers new methods for recapitalizing and restructuring the institution by imposing losses on shareholders and creditors. (http://www.federalreserve.gov)
I came up with suggestions for regulatory improvements that could probably help to keep financial markets stable and at least be some how predictable. Here they are:
1. Promoting strong supervision and regulation over financial institutions. These institutions are critical for the market and must be subject for strict oversight.
2. Establishing comprehensive regulation over financial market, adding up new requirements for stock and derivative markets transparency.
3. Protecting investors and consumers from financial frauds by building trust in the market, also consistent and strong supervision of investment financial services. (http://www.treasury.gov)
The purpose of this paper is to provide a summary of the article called “Can We Keep Our Promises?” by Robert D. Arnott, and to help better understand the three key risks facing each investor.
In addition, the Federal Reserve did badly on supervision of the financial market. Many banks did not have enough ability to value their risk. The Federal Reserve and other supervision institution should require these banks to enhance their ability of risk valuing.
Since they are financial legislation, Sarbanes-Oxley Act and Dodd-Frank Act have strong relationship with the modern financial markets. This relationship is mainly attributed to the implications that the acts have on market participants, regulators, investors, and markets in general. These acts primarily focus on promoting the health and vitality of financial markets by addressing several practices that could have considerable negative effects on market participants and the economy in general. Actually, Dodd-Frank, which is arguably the most important financial legislation in modern economy, brought significant changes that contributed to changes in th...
The Dodd-Frank Wall Street Reform and Consumer Protection Act’s policies haven’t really been implemented to the extent that regulators would have liked. Although the legislation takes many steps in addressing systematic risks in the United States financial system and improving coordination among regulators, some critics believe that alternative options might have been more effective. The coming years will give us a better understanding of how well the Dodd-Frank Act addressed these concerns.
Major banks are cutting back on some of their legally permitted operations, such as- market making, and that has led to liquidity issues in the bond markets. Proprietary trading could become unregulated if more banking activities continue moving towards the shadow banking system. This would essentially defeat one of the main purposes of Volcker Rule. [d] The third major unintended consequence has been the degree by which the Federal Reserve has become the main regulator of the finance industry. In order to discourage future bailouts similar to the ones during the financial crisis, the Dodd-Frank Act limited the Fed’s emergency powers. However the liquidity and capital standards now imposed by Fed has purportedly become one of the most important regulatory developments of the Dodd-Frank Act.
In October of 1929, the American economy took a huge hit from the stock market crash. Since so much people had invested their money and time in the banks, when the banks closed many had lost all of their money and were in the deep poverty. Because of this, one of my first actions of the New Deal was the Federal Deposit Insurance Corporation (FDIC). Every bank in the United States had to abide by this rule. This banking program I launched not only ensured the safety and protection of deposits made my users of banks, but had also restored America’s faith in banks, causing people to once again use banks which contributed in enriching the economy. Another legislation I was determined to get passed...
Market Risk is also known as Systematic Risk due to its broad impact on investments. The level of Market Risk depends on the probability that the entire market will decline and drag down the values of all companies. With Market Risk, investors stand to lose value irrespective of the companies, business sectors, or investment vehicles they are invested in. It can be difficult for investors to protect themselves against market risk, since investment strategies, like diversification, is mostly ineffective (Investopedia,
This paper will serve as a discussion on the topic of investment banking. In this paper the author includes various articles and thoughts that help to understand the background and principle of investment banking. This discourse will attempt to address this issue through explaining what investment banking is, introducing major investment bankers, and how investment banking affects our globally economy. Investment Banking Defined Investopedia (2008) stated this definition about investment banking, “A specific division of banking related to the creation of capital for other companies. Investment banks underwrite new debt and equity securities for all types of corporations.
In your response, build upon extant portfolio theory and make sure to talk about different types of risks that investors might face and how they go about managing such risks. This means you need to consider topics such as efficient frontier and optimal portfolios; as well their relevance to investment theory. Furthermore, given the nature of the assignment, avoid bringing the brokerage industry into your discussion. In other words, assume you can invest directly in the stock market and do not need any financial intermediaries like brokerage houses.
During the 1920s, approximately 20 million Americans took advantage of post-war prosperity by purchasing shares of stock in various securities exchanges. When the stock market crashed in 1929, the fortunes of many investors were lost. In addition, banks lost great sums of money in the Crash because they had invested heavily in the markets. When people feared their banks might not be able to pay back the money that depositors had in their accounts, a “run” on the banking system caused many bank failures. After the crash, public confidence in the market and the economy fell sharply. In response, Congress held hearings to identify the problems and look for solutions; the answer was found in the new SEC. The Commission was established in 1934 to enforce new securities laws that were passed with the Securities Act of 1933 and the Securities Exchange Act of 1934. The two new laws stated that “Companies publicly offering securities must tell the public the truth about their businesses, the securities they are selling and the risks involved in the investing.” Secondly, “People who sell and trade securities must treat investors fairly and honestly, putting investors’ interests first.”2
The execution of our investment strategy occurred in three stages. First, we invested in t-bills and bonds according to our original set out investment plan. This was to decrease potential losses and risk associated with the declining equity market. Therefore, we invested about two hundred thousand of our funds into these low risk assets to maintain buying power. Due to inflation, we did not want to lose buying power by leaving funds in an account without earning interest. Further, we invested a small portion of funds into the commodity market. With a slumping equity market and a positive outlook on the gold commodity, we invested in Gold Corporation at the same time we invested in income assets.
One of the key areas of long-term decision-making that firms must tackle is that of investment - the need to commit funds by purchasing land, buildings, machinery, etc., in anticipation of being able to earn an income greater than the funds committed. In order to handle these decisions, firms have to make an assessment of the size of the outflows and inflows of funds, the lifespan of the investment, the degree of risk attached and the cost of obtaining funds.
standards, catch up with the trends and produce tax revenues. The importance of equity investors
Our understanding and the concept of investment in behavioural finance combines economics and psychology to analyse how and why investors make final decision. As an investor one’s decision to invest is fully influence by different type of attitudes of behavioural and psychological ( Ricciardi & Simon, 2000). Yet, in order to maximize their financial goal, investors must have a good investment planning. Furthermore , to gain a good investment planning , there must be a good decision making among investors. They have to choose the right investment plan I order to manage the resources for different type of investments not only to gain profit wise but also to avoid the risk that occur from investment.
Using the Modern Portfolio Theory, overtime risk assets will provide a higher expected rate of return, as compensation to the investors for accepting a high risk. The high risk will eventually lower collecting asset classes to the portfolio, thus reducing the volatile risk, and increasing the expected rates of return. Furthermore the purpose of this theory is to develop the most optimal investments portfolio which would yield the highest rate of return while ascertaining the risk for the individual or corporate investor.