A transactional account (North America: checking account or chequing account, United Kingdom and some other countries: current account or cheque account) is a deposit account held at a bank or other financial institution, for the purpose of securely and quickly providing frequent access to funds on demand, through a variety of different channels. Because money is available on demand these accounts are also referred to as demand accounts or demand deposit accounts.
Transactional accounts are meant neither for the purpose of earning interest nor for the purpose of savings, but for convenience of the business or personal client; hence they tend not to bear interest. Instead, a customer can deposit or withdraw any amount of money any number of times, subject to availability of funds.
Friday, May 28, 2010
Checking accounts:
A deposit account held at a bank or other financial institution, for the purpose of securely and quickly providing frequent access to funds on demand, through a variety of different channels. Because money is available on demand these accounts are also referred to as demand accounts or demand deposit accounts.
Savings accounts: Accounts maintained by retail banks that pay interest but can not be used directly as money (for example, by writing a cheque). Although not as convenient to use as checking accounts, these accounts let customers keep liquid assets while still earning a monetary return.
Money market account: A deposit account with a relatively high rate of interest, and short notice (or no notice) required for withdrawals. In the United States, it is a style of instant access deposit subject to federal savings account regulations, such as a monthly transaction limit.
Time deposit: A money deposit at a banking institution that cannot be withdrawn for a preset fixed 'term' or period of time. When the term is over it can be withdrawn or it can be rolled over for another term. Generally speaking, the longer the term the better the yield on the money.
Savings accounts: Accounts maintained by retail banks that pay interest but can not be used directly as money (for example, by writing a cheque). Although not as convenient to use as checking accounts, these accounts let customers keep liquid assets while still earning a monetary return.
Money market account: A deposit account with a relatively high rate of interest, and short notice (or no notice) required for withdrawals. In the United States, it is a style of instant access deposit subject to federal savings account regulations, such as a monthly transaction limit.
Time deposit: A money deposit at a banking institution that cannot be withdrawn for a preset fixed 'term' or period of time. When the term is over it can be withdrawn or it can be rolled over for another term. Generally speaking, the longer the term the better the yield on the money.
Deposit account
A deposit account is a current account, savings account, or other type of bank account, at a banking institution that allows money to be deposited and withdrawn by the account holder. These transactions are recorded on the bank's books, and the resulting balance is recorded as a liability for the bank, and represent the amount owed by the bank to the customer. Some banks charge a fee for this service, while others may pay the customer interest on the funds deposited.
Savings bank
A savings bank is a financial institution whose primary purpose is accepting savings deposits. It may also perform some other functions.
In Europe, savings banks originated in the 19th or sometimes even the 18th century. Their original objective was to provide easily accessible savings products to all strata of the population. In some countries, savings banks were created on public initiative, while in others, socially committed individuals created foundations to put in place the necessary infrastructure.
In 1914, the New Student's Reference Work said of the origins: [1]
France claims the credit of being the mother of savings banks, basing this claim on a savings bank said to have been established in 1765 in the town of Brumuth, but it is of record that the savings bank idea was suggested in England as early as 1697. There was a savings bank in Hamburg, Germany, in 1778 and in Berne, Switzerland, in 1787. The first English savings bank was established in 1799, and postal savings banks were started in England in 1861.
The first chartered savings bank in the United States was the Provident Institution for Savings in the Town of Boston, incorporated December 13, 1816. The Philadelphia Savings Fund Society began business the same year, but was not incorporated until 1819. In 1818 banks for savings were incorporated in Baltimore and Salem, and in 1819 in New York, Hartford, Newport and Providence.
Nowadays, European savings banks have kept their focus on retail banking: payments, savings products, credits and insurances for individuals or small and medium-sized entreprises. Apart from this retail focus, they also differ from commercial banks by their broadly decentralised distribution network, providing local and regional outreach.
Communist Czechoslovakia: see Economy of Communist Czechoslovakia
Germany: see Sparkassen
New Zealand: Savings banks ceased to exist in 1987 as an official type of bank, being replaced with registered banks (Grimes, 1998)
Soviet Union: Traditionally, the Russian term sberkassa (сберкасса, сберегательная касса) is translated as "savings bank". However sberkassas were not banks in the common sense. Initially they were the outlets of the only Soviet State Bank, Gosbank until 1987 and Sberbank (USSR Savings Bank) afterwards.
Spain: see Savings bank (Spain)
United Kingdom: see Trustee savings bank
United States: see Savings and loan association and Mutual savings bank
In Europe, savings banks originated in the 19th or sometimes even the 18th century. Their original objective was to provide easily accessible savings products to all strata of the population. In some countries, savings banks were created on public initiative, while in others, socially committed individuals created foundations to put in place the necessary infrastructure.
In 1914, the New Student's Reference Work said of the origins: [1]
France claims the credit of being the mother of savings banks, basing this claim on a savings bank said to have been established in 1765 in the town of Brumuth, but it is of record that the savings bank idea was suggested in England as early as 1697. There was a savings bank in Hamburg, Germany, in 1778 and in Berne, Switzerland, in 1787. The first English savings bank was established in 1799, and postal savings banks were started in England in 1861.
The first chartered savings bank in the United States was the Provident Institution for Savings in the Town of Boston, incorporated December 13, 1816. The Philadelphia Savings Fund Society began business the same year, but was not incorporated until 1819. In 1818 banks for savings were incorporated in Baltimore and Salem, and in 1819 in New York, Hartford, Newport and Providence.
Nowadays, European savings banks have kept their focus on retail banking: payments, savings products, credits and insurances for individuals or small and medium-sized entreprises. Apart from this retail focus, they also differ from commercial banks by their broadly decentralised distribution network, providing local and regional outreach.
Communist Czechoslovakia: see Economy of Communist Czechoslovakia
Germany: see Sparkassen
New Zealand: Savings banks ceased to exist in 1987 as an official type of bank, being replaced with registered banks (Grimes, 1998)
Soviet Union: Traditionally, the Russian term sberkassa (сберкасса, сберегательная касса) is translated as "savings bank". However sberkassas were not banks in the common sense. Initially they were the outlets of the only Soviet State Bank, Gosbank until 1987 and Sberbank (USSR Savings Bank) afterwards.
Spain: see Savings bank (Spain)
United Kingdom: see Trustee savings bank
United States: see Savings and loan association and Mutual savings bank
Private bank
Private banks are banks that are not incorporated. A private bank is owned by either an individual or a general partner(s) with limited partners. In any such case, the creditors can look to both the "entirety of the bank's assets" as well as the entirety of the sole-proprietor's/general-partners' assets.
These banks have a long tradition in Switzerland, dating back to at least the revocation of the Edict of Nantes (1685). However most have now become incorporated companies, so the term is rarely true anymore. There are a few private banks remaining in the U.S. One is Brown Brothers Harriman & Co., a general partnership with about 30 members. This is also true of private banks in Europe such as the Swiss Bank Hottinger & Cie.
"Private banks" and "private banking" can also refer to non-government owned banks in general, in contrast to government-owned (or nationalized) banks, which were prevalent in communist, socialist and some social democratic states in the 20th century. Private banks as a form of organization should also not be confused with "Private Banks" that offer financial services to high net worth individuals and others.
These banks have a long tradition in Switzerland, dating back to at least the revocation of the Edict of Nantes (1685). However most have now become incorporated companies, so the term is rarely true anymore. There are a few private banks remaining in the U.S. One is Brown Brothers Harriman & Co., a general partnership with about 30 members. This is also true of private banks in Europe such as the Swiss Bank Hottinger & Cie.
"Private banks" and "private banking" can also refer to non-government owned banks in general, in contrast to government-owned (or nationalized) banks, which were prevalent in communist, socialist and some social democratic states in the 20th century. Private banks as a form of organization should also not be confused with "Private Banks" that offer financial services to high net worth individuals and others.
National bank
The term national bank has several meanings:
especially in developing countries, a bank owned by the state
an ordinary private bank which operates nationally (as opposed to regionally or locally or even internationally)
in the United States, an ordinary private bank operating within a specific regulatory structure, which may or may not operate nationally.
In the past, the term "national bank" has been used synonymously with "central bank", but it is no longer used in this sense today. Some central banks may have the words "National Bank" in their name; conversely if a bank is named in this way, it is not automatically considered a central bank. For example, National-Bank AG in Essen, Germany is a privately owned commercial bank, just like National Bank of Canada of Montreal, Canada. On the other side, National Bank of Ethiopia is the central bank of Ethiopia and National Bank of Cambodia is the central bank of Cambodia.
especially in developing countries, a bank owned by the state
an ordinary private bank which operates nationally (as opposed to regionally or locally or even internationally)
in the United States, an ordinary private bank operating within a specific regulatory structure, which may or may not operate nationally.
In the past, the term "national bank" has been used synonymously with "central bank", but it is no longer used in this sense today. Some central banks may have the words "National Bank" in their name; conversely if a bank is named in this way, it is not automatically considered a central bank. For example, National-Bank AG in Essen, Germany is a privately owned commercial bank, just like National Bank of Canada of Montreal, Canada. On the other side, National Bank of Ethiopia is the central bank of Ethiopia and National Bank of Cambodia is the central bank of Cambodia.
Industrial loan company
An industrial loan company (ILC) or industrial bank is a financial institution in the United States that lends money, and may be owned by non-financial institutions. Though such banks offer FDIC-insured deposits and are subject to FDIC and state regulator oversight, a debate exists to allow parent companies such as Wal-Mart to remain unregulated by the financial regulators. "FDIC-insured entities are subject to Sections 23A and 23B of the Federal Reserve Act, which limits bank transactions with affiliates, including the parent company." (FDIC.gov) The ILC is permitted to have branches in multiple states (which is permitted by many states on a reciprocal basis). They are state-chartered, and insured by the Federal Deposit Insurance Corporation. They are currently chartered by seven states, with most chartered by Utah. Other states permitting them include California, Colorado, Minnesota, Indiana, Hawaii, and Nevada.
Companies that have set up industrial banks include UBS, General Electric Co., General Motors, Merrill Lynch & Co. Inc., Morgan Stanley, American Express Co. Target Corp, Nordstrom, Harley-Davidson, First Data, UnitedHealth Group, BMW, and Sallie Mae. In May 2005, Warren Buffett's Berkshire Hathaway, Inc. announced plans to operate a Utah industrial bank to handle consumer loans for its R. C. Willey Home Furnishings stores. The Blue Cross and Blue Shield Association, Ford Motor Co., Ceridian Corp. and Home Depot await approval.
Top Ten FDIC-Insured Industrial Banks by Assets, 2005 ($ millions)
Rank Bank State assets
1 Merrill Lynch Bank USA UT $60,367.7
2 UBS Bank USA UT $18,585.8
3 American Express Centurion Bank UT $15,933.0
4 Fremont Investment & Loan CA $11,316.4
5 Morgan Stanley Bank UT $8,674.9
6 USAA Savings Bank NV $7,099.6
7 GMAC Commercial Mortgage Bank UT $4,872.5
8 GMAC Automotive Bank UT $2,429.5
9 Beal Savings Bank NV $2,420.2
10 Lehman Brothers Commercial Bank UT $2,127.2
Source: Federal Deposit Insurance Corporation. As of 2009, some of these banks are no longer extant.
However, the assets held by an ILC tend to paint an incomplete picture. The actual loan book amount can be considered more important. In this view, for example, UBS would replace Merrill Lynch as number 1.
Companies that have set up industrial banks include UBS, General Electric Co., General Motors, Merrill Lynch & Co. Inc., Morgan Stanley, American Express Co. Target Corp, Nordstrom, Harley-Davidson, First Data, UnitedHealth Group, BMW, and Sallie Mae. In May 2005, Warren Buffett's Berkshire Hathaway, Inc. announced plans to operate a Utah industrial bank to handle consumer loans for its R. C. Willey Home Furnishings stores. The Blue Cross and Blue Shield Association, Ford Motor Co., Ceridian Corp. and Home Depot await approval.
Top Ten FDIC-Insured Industrial Banks by Assets, 2005 ($ millions)
Rank Bank State assets
1 Merrill Lynch Bank USA UT $60,367.7
2 UBS Bank USA UT $18,585.8
3 American Express Centurion Bank UT $15,933.0
4 Fremont Investment & Loan CA $11,316.4
5 Morgan Stanley Bank UT $8,674.9
6 USAA Savings Bank NV $7,099.6
7 GMAC Commercial Mortgage Bank UT $4,872.5
8 GMAC Automotive Bank UT $2,429.5
9 Beal Savings Bank NV $2,420.2
10 Lehman Brothers Commercial Bank UT $2,127.2
Source: Federal Deposit Insurance Corporation. As of 2009, some of these banks are no longer extant.
However, the assets held by an ILC tend to paint an incomplete picture. The actual loan book amount can be considered more important. In this view, for example, UBS would replace Merrill Lynch as number 1.
Core investment banking activities
Investment banking is the traditional aspect of the investment banks which also involves helping customers raise funds in the capital markets and giving advice on M&A's aka mergers and acquisitions. Investment banking may involve subscribing investors to a security issuance, coordinating with bidders, or negotiating with a merger target. Another term for the investment banking division is corporate finance, and its advisory group is often termed mergers and acquisitions (M&A). A pitch book of financial information is generated to market the bank to a potential M&A client; if the pitch is successful, the bank arranges the deal for the client. The investment banking division (IBD) is generally divided into industry coverage and product coverage groups. Industry coverage groups focus on a specific industry such as healthcare, industrials, or technology, and maintain relationships with corporations within the industry to bring in business for a bank. Product coverage groups focus on financial products, such as mergers and acquisitions, leveraged finance, project finance, asset finance and leasing, structured finance, restructuring, equity, and high-grade debt and generally work and collaborate with industry groups in the more intricate and specialized needs of a client.
Sales and trading: On behalf of the bank and its clients, the primary function of a large investment bank is buying and selling products. In market making, traders will buy and sell financial products with the goal of making an incremental amount of money on each trade. Sales is the term for the investment banks sales force, whose primary job is to call on institutional and high-net-worth investors to suggest trading ideas (on caveat emptor basis) and take orders. Sales desks then communicate their clients' orders to the appropriate trading desks, who can price and execute trades, or structure new products that fit a specific need. Structuring has been a relatively recent activity as derivatives have come into play, with highly technical and numerate employees working on creating complex structured products which typically offer much greater margins and returns than underlying cash securities. Strategists advise external as well as internal clients on the strategies that can be adopted in various markets. Ranging from derivatives to specific industries, strategists place companies and industries in a quantitative framework with full consideration of the macroeconomic scene. This strategy often affects the way the firm will operate in the market, the direction it would like to take in terms of its proprietary and flow positions, the suggestions salespersons give to clients, as well as the way structurers create new products. Banks also undertake risk through proprietary trading, done by a special set of traders who do not interface with clients and through "principal risk", risk undertaken by a trader after he buys or sells a product to a client and does not hedge his total exposure. Banks seek to maximize profitability for a given amount of risk on their balance sheet. The necessity for numerical ability in sales and trading has created jobs for physics, math and engineering Ph.D.s who act as quantitative analysts.
Research is the division which reviews companies and writes reports about their prospects, often with "buy" or "sell" ratings. While the research division may or may not generate revenue (based on policies at different banks), its resources are used to assist traders in trading, the sales force in suggesting ideas to customers, and investment bankers by covering their clients. Research also serves outside clients with investment advice (such as institutional investors and high net worth individuals) in the hopes that these clients will execute suggested trade ideas through the Sales & Trading division of the bank, thereby bringing in revenue for the firm. There is a potential conflict of interest between the investment bank and its analysis in that published analysis can affect the profits of the bank. Therefore in recent years the relationship between investment banking and research has become highly regulated requiring a Chinese wall between public and private functions.
Sales and trading: On behalf of the bank and its clients, the primary function of a large investment bank is buying and selling products. In market making, traders will buy and sell financial products with the goal of making an incremental amount of money on each trade. Sales is the term for the investment banks sales force, whose primary job is to call on institutional and high-net-worth investors to suggest trading ideas (on caveat emptor basis) and take orders. Sales desks then communicate their clients' orders to the appropriate trading desks, who can price and execute trades, or structure new products that fit a specific need. Structuring has been a relatively recent activity as derivatives have come into play, with highly technical and numerate employees working on creating complex structured products which typically offer much greater margins and returns than underlying cash securities. Strategists advise external as well as internal clients on the strategies that can be adopted in various markets. Ranging from derivatives to specific industries, strategists place companies and industries in a quantitative framework with full consideration of the macroeconomic scene. This strategy often affects the way the firm will operate in the market, the direction it would like to take in terms of its proprietary and flow positions, the suggestions salespersons give to clients, as well as the way structurers create new products. Banks also undertake risk through proprietary trading, done by a special set of traders who do not interface with clients and through "principal risk", risk undertaken by a trader after he buys or sells a product to a client and does not hedge his total exposure. Banks seek to maximize profitability for a given amount of risk on their balance sheet. The necessity for numerical ability in sales and trading has created jobs for physics, math and engineering Ph.D.s who act as quantitative analysts.
Research is the division which reviews companies and writes reports about their prospects, often with "buy" or "sell" ratings. While the research division may or may not generate revenue (based on policies at different banks), its resources are used to assist traders in trading, the sales force in suggesting ideas to customers, and investment bankers by covering their clients. Research also serves outside clients with investment advice (such as institutional investors and high net worth individuals) in the hopes that these clients will execute suggested trade ideas through the Sales & Trading division of the bank, thereby bringing in revenue for the firm. There is a potential conflict of interest between the investment bank and its analysis in that published analysis can affect the profits of the bank. Therefore in recent years the relationship between investment banking and research has become highly regulated requiring a Chinese wall between public and private functions.
Investment banking
An investment bank is a financial institution that assists corporations and governments in raising capital by underwriting and acting as the agent in the issuance of securities. An investment bank also assists companies involved in mergers and acquisitions, derivatives, etc. Further it provides ancillary services such as market making and the trading of derivatives, fixed income instruments, foreign exchange, commodity, and equity securities.
Unlike commercial banks and retail banks, investment banks do not take deposits.
To provide investment banking services in the United States an advisor must be a licensed broker-dealer. The advisor is subject to Securities & Exchange Commission (SEC) (FINRA) regulation. Until 1999, the United States maintained a separation between investment banking and commercial banks. Other industrialized countries, including G7 countries, have not maintained this separation historically. Trading securities for cash or securities (i.e., facilitating transactions, market-making), or the promotion of securities (i.e., underwriting, research, etc.) was referred to as the "sell side".
Dealing with the pension funds, mutual funds, hedge funds, and the investing public who consumed the products and services of the sell-side in order to maximize their return on investment constitutes the "buy side". Many firms have buy and sell side components.
Unlike commercial banks and retail banks, investment banks do not take deposits.
To provide investment banking services in the United States an advisor must be a licensed broker-dealer. The advisor is subject to Securities & Exchange Commission (SEC) (FINRA) regulation. Until 1999, the United States maintained a separation between investment banking and commercial banks. Other industrialized countries, including G7 countries, have not maintained this separation historically. Trading securities for cash or securities (i.e., facilitating transactions, market-making), or the promotion of securities (i.e., underwriting, research, etc.) was referred to as the "sell side".
Dealing with the pension funds, mutual funds, hedge funds, and the investing public who consumed the products and services of the sell-side in order to maximize their return on investment constitutes the "buy side". Many firms have buy and sell side components.
Commercial bank
A commercial bank is a type of financial intermediary and a type of bank. Commercial banking is also known as business banking. It is a bank that provides checking accounts, savings accounts, and money market accounts and that accepts time deposits.[1] After the implementation of the Glass-Steagall Act, the U.S. Congress required that banks engage only in banking activities, whereas investment banks were limited to capital market activities. As the two no longer have to be under separate ownership under U.S. law, some use the term "commercial bank" to refer to a bank or a division of a bank primarily dealing with deposits and loans from corporations or large businesses. In some other jurisdictions, the strict separation of investment and commercial banking never applied. Commercial banking may also be seen as distinct from retail banking, which involves the provision of financial services direct to consumers. Many banks offer both commercial and retail banking services.
Central bank
A central bank, reserve bank, or monetary authority is a banking institution granted the exclusive privilege to lend a government its currency. Like a normal commercial bank, a central bank charges interest on the loans made to borrowers, primarily the government of whichever country the bank exists for, and to other commercial banks, typically as a 'lender of last resort'. However, a central bank is distinguished from a normal commercial bank because it has a monopoly on creating the currency of that nation, which is loaned to the government in the form of legal tender. It is a bank that can lend money to other banks in times of need. Its primary function is to provide the nation's money supply, but more active duties include controlling subsidized-loan interest rates, and acting as a lender of last resort to the banking sector during times of financial crisis (private banks often being integral to the national financial system). It may also have supervisory powers, to ensure that banks and other financial institutions do not behave recklessly or fraudulently.
Most richer countries today have an "independent" central bank, that is, one which operates under rules designed to prevent political interference. Examples include the European Central Bank (ECB) and the Federal Reserve System in the United States. Some central banks are publicly owned, and others are privately owned. For example, the United States Federal Reserve is a quasi-public corporation.
Most richer countries today have an "independent" central bank, that is, one which operates under rules designed to prevent political interference. Examples include the European Central Bank (ECB) and the Federal Reserve System in the United States. Some central banks are publicly owned, and others are privately owned. For example, the United States Federal Reserve is a quasi-public corporation.
Bank
A bank is a financial intermediary that accepts deposits and channels those deposits into lending activities. Banks are a fundamental component of the financial system, and are also active players in financial markets. The essential role of a bank is to connect those who have capital (such as investors or depositors), with those who seek capital (such as individuals wanting a loan, or businesses wanting to grow).
Banking is generally a highly regulated industry, and government restrictions on financial activities by banks have varied over time and location. The current set of global standards are called Basel II. In some countries such as Germany, banks have historically owned major stakes in industrial corporations while in other countries such as the United States banks are prohibited from owning non-financial companies. In Japan, banks are usually the nexus of a cross-share holding entity known as the keiretsu. In France, bancassurance is prevalent, as most banks offer insurance services (and now real estate services) to their clients. The most recent trend has been the advance of universal banks, which attempt to offer their customers the full spectrum of financial services under the one roof.
The oldest bank still in existence is Monte dei Paschi di Siena, headquartered in Siena, Italy, which has been operating continuously since 1472.
Banking is generally a highly regulated industry, and government restrictions on financial activities by banks have varied over time and location. The current set of global standards are called Basel II. In some countries such as Germany, banks have historically owned major stakes in industrial corporations while in other countries such as the United States banks are prohibited from owning non-financial companies. In Japan, banks are usually the nexus of a cross-share holding entity known as the keiretsu. In France, bancassurance is prevalent, as most banks offer insurance services (and now real estate services) to their clients. The most recent trend has been the advance of universal banks, which attempt to offer their customers the full spectrum of financial services under the one roof.
The oldest bank still in existence is Monte dei Paschi di Siena, headquartered in Siena, Italy, which has been operating continuously since 1472.
Behavioral finance
Behavioral finance studies how the psychology of investors or managers affects financial decisions and markets. Behavioral finance has grown over the last few decades to become central to finance.
Behavioral finance includes such topics as:
1.Empirical studies that demonstrate significant deviations from classical theories.
2.Models of how psychology affects trading and prices
3.Forecasting based on these methods.
4.Studies of experimental asset markets and use of models to forecast experiments.
A strand of behavioral finance has been dubbed Quantitative Behavioral Finance, which uses mathematical and statistical methodology to understand behavioral biases in conjunction with valuation. Some of this endeavor has been led by Gunduz Caginalp (Professor of Mathematics and Editor of Journal of Behavioral Finance during 2001-2004) and collaborators including Vernon Smith (2002 Nobel Laureate in Economics), David Porter, Don Balenovich, Vladimira Ilieva, Ahmet Duran). Studies by Jeff Madura, Ray Sturm and others have demonstrated significant behavioral effects in stocks and exchange traded funds. Among other topics, quantitative behavioral finance studies behavioral effects together with the non-classical assumption of the finiteness of assets.
Behavioral finance includes such topics as:
1.Empirical studies that demonstrate significant deviations from classical theories.
2.Models of how psychology affects trading and prices
3.Forecasting based on these methods.
4.Studies of experimental asset markets and use of models to forecast experiments.
A strand of behavioral finance has been dubbed Quantitative Behavioral Finance, which uses mathematical and statistical methodology to understand behavioral biases in conjunction with valuation. Some of this endeavor has been led by Gunduz Caginalp (Professor of Mathematics and Editor of Journal of Behavioral Finance during 2001-2004) and collaborators including Vernon Smith (2002 Nobel Laureate in Economics), David Porter, Don Balenovich, Vladimira Ilieva, Ahmet Duran). Studies by Jeff Madura, Ray Sturm and others have demonstrated significant behavioral effects in stocks and exchange traded funds. Among other topics, quantitative behavioral finance studies behavioral effects together with the non-classical assumption of the finiteness of assets.
Experimental finance
Experimental finance,aims to establish different market settings and environments to observe experimentally and provide a lens through which science can analyze agents' behavior and the resulting characteristics of trading flows, information diffusion and aggregation, price setting mechanisms, and returns processes. Researchers in experimental finance can study to what extent existing financial economics theory makes valid predictions, and attempt to discover new principles on which such theory can be extended. Research may proceed by conducting trading simulations or by establishing and studying the behaviour of people in artificial competitive market-like settings.
Financial mathematics
Financial mathematics is a main branch of applied mathematics concerned with the financial markets. Financial mathematics is the study of financial data with the tools of mathematics, mainly statistics. Such data can be movements of securities—stocks and bonds etc.and their relations. Another large subfield is insurance mathematics. This is also known as quantitative finance, practitioners as Quantitative Analysts.
Cash budget
Working capital requirements of a business should be monitored at all times to ensure that there are sufficient funds available to meet short-term expenses.
The cash budget is basically a detailed plan that shows all expected sources and uses of cash. The cash budget has the following six main sections:
1.Beginning Cash Balance - contains the last period's closing cash balance.
2.Cash collections - includes all expected cash receipts (all sources of cash for the period considered, mainly sales)
3.Cash disbursements - lists all planned cash outflows for the period, excluding interest payments on short-term loans, which appear in the financing section. All expenses that do not affect cash flow are excluded from this list (e.g. depreciation, amortization, etc.)
4.Cash excess or deficiency - a function of the cash needs and cash available. Cash needs are determined by the total cash disbursements plus the minimum cash balance required by company policy. If total cash available is less than cash needs, a deficiency exists.
5.Financing - discloses the planned borrowings and repayments, including interest.
6.Ending Cash balance - simply reveals the planned ending cash balance.
The cash budget is basically a detailed plan that shows all expected sources and uses of cash. The cash budget has the following six main sections:
1.Beginning Cash Balance - contains the last period's closing cash balance.
2.Cash collections - includes all expected cash receipts (all sources of cash for the period considered, mainly sales)
3.Cash disbursements - lists all planned cash outflows for the period, excluding interest payments on short-term loans, which appear in the financing section. All expenses that do not affect cash flow are excluded from this list (e.g. depreciation, amortization, etc.)
4.Cash excess or deficiency - a function of the cash needs and cash available. Cash needs are determined by the total cash disbursements plus the minimum cash balance required by company policy. If total cash available is less than cash needs, a deficiency exists.
5.Financing - discloses the planned borrowings and repayments, including interest.
6.Ending Cash balance - simply reveals the planned ending cash balance.
Capital
Capital,in the financial sense, is the money that gives the business the power to buy goods to be used in the production of other goods or the offering of a service.
Personal finance
How much money will be needed by an individual (or by a family), and when?
Where will this money come from, and how?
How can people protect themselves against unforeseen personal events, as well as those in the external economy?
How can family assets best be transferred across generations (bequests and inheritance)?
How does tax policy (tax subsidies or penalties) affect personal financial decisions?
How does credit affect an individual's financial standing?
How can one plan for a secure financial future in an environment of economic instability?
Personal financial decisions may involve paying for education, financing durable goods such as real estate and cars, buying insurance, e.g. health and property insurance, investing and saving for retirement.
Personal financial decisions may also involve paying for a loan, or debt obligations.
Where will this money come from, and how?
How can people protect themselves against unforeseen personal events, as well as those in the external economy?
How can family assets best be transferred across generations (bequests and inheritance)?
How does tax policy (tax subsidies or penalties) affect personal financial decisions?
How does credit affect an individual's financial standing?
How can one plan for a secure financial future in an environment of economic instability?
Personal financial decisions may involve paying for education, financing durable goods such as real estate and cars, buying insurance, e.g. health and property insurance, investing and saving for retirement.
Personal financial decisions may also involve paying for a loan, or debt obligations.
The main techniques and sectors of the financial industry
An entity whose income exceeds their expenditure can lend or invest the excess income. On the other hand, an entity whose income is less than its expenditure can raise capital by borrowing or selling equity claims, decreasing its expenses, or increasing its income. The lender can find a borrower, a financial intermediary such as a bank, or buy notes or bonds in the bond market. The lender receives interest, the borrower pays a higher interest than the lender receives, and the financial intermediary pockets the difference.
A bank aggregates the activities of many borrowers and lenders. A bank accepts deposits from lenders, on which it pays interest. The bank then lends these deposits to borrowers. Banks allow borrowers and lenders, of different sizes, to coordinate their activity. Banks are thus compensators of money flows in space.
A specific example of corporate finance is the sale of stock by a company to institutional investors like investment banks, who may sell it on to private investors, or other financial institutions such as pension funds. The stock give part ownership in that company in proportion to shares owned.
In return for the stock, the company receives cash, which it may use to expand its business; ("equity financing"), to reduce its debt. Equity financing mixed with the sale of bonds (or any other debt financing) is called the company's capital structure.
Finance is used by individuals (personal finance), by governments (public finance), by businesses (corporate finance), as well as by a wide variety of organizations including schools and non-profit organizations. In general, the goals of each of the above activities are achieved through the use of appropriate financial instruments and methodologies, with consideration to their institutional setting.
Finance is one of the most important aspects of business management. Without proper financial planning a new enterprise is unlikely to be successful. Managing money (a liquid asset) is essential to ensure a secure future, both for the individual and an organization.
A bank aggregates the activities of many borrowers and lenders. A bank accepts deposits from lenders, on which it pays interest. The bank then lends these deposits to borrowers. Banks allow borrowers and lenders, of different sizes, to coordinate their activity. Banks are thus compensators of money flows in space.
A specific example of corporate finance is the sale of stock by a company to institutional investors like investment banks, who may sell it on to private investors, or other financial institutions such as pension funds. The stock give part ownership in that company in proportion to shares owned.
In return for the stock, the company receives cash, which it may use to expand its business; ("equity financing"), to reduce its debt. Equity financing mixed with the sale of bonds (or any other debt financing) is called the company's capital structure.
Finance is used by individuals (personal finance), by governments (public finance), by businesses (corporate finance), as well as by a wide variety of organizations including schools and non-profit organizations. In general, the goals of each of the above activities are achieved through the use of appropriate financial instruments and methodologies, with consideration to their institutional setting.
Finance is one of the most important aspects of business management. Without proper financial planning a new enterprise is unlikely to be successful. Managing money (a liquid asset) is essential to ensure a secure future, both for the individual and an organization.
Finance
Finance is the science of funds management. The general areas of finance are business finance, personal finance, and public finance.Finance includes saving money and often includes lending money. The field of finance deals with the concepts of time, money and risk and how they are interrelated. It also deals with how money is spent and budgeted.
One aspect of finance is through individuals and business organizations, which deposit money in a bank. The bank then lends the money out to other individuals or corporations for consumption or investment, and charges interest on the loans.
Loans have become increasingly packaged for resale, meaning that an investor buys the loan from a bank or directly from a corporation. Bonds are debt instruments sold to investors for organisations such as companies, governments or charities . The investor can then hold the debt and collect the interest or sell the debt on a secondary market. Banks are the main facilitators of funding through the provision of credit, although private equity, mutual funds, hedge funds, and other organizations have become important as they invest in various forms of debt. Financial assets, known as investments, are financially managed with careful attention to financial risk management to control financial risk. Financial instruments allow many forms of securitized assets to be traded on securities exchanges such as stock exchanges, including debt such as bonds as well as equity in publicly-traded corporations.
Central banks, such as the Federal Reserve System banks in the United States and Bank of England in the United Kingdom, are strong players in public finance, acting as lenders of last resort as well as strong influences on monetary and credit conditions in the economy.
One aspect of finance is through individuals and business organizations, which deposit money in a bank. The bank then lends the money out to other individuals or corporations for consumption or investment, and charges interest on the loans.
Loans have become increasingly packaged for resale, meaning that an investor buys the loan from a bank or directly from a corporation. Bonds are debt instruments sold to investors for organisations such as companies, governments or charities . The investor can then hold the debt and collect the interest or sell the debt on a secondary market. Banks are the main facilitators of funding through the provision of credit, although private equity, mutual funds, hedge funds, and other organizations have become important as they invest in various forms of debt. Financial assets, known as investments, are financially managed with careful attention to financial risk management to control financial risk. Financial instruments allow many forms of securitized assets to be traded on securities exchanges such as stock exchanges, including debt such as bonds as well as equity in publicly-traded corporations.
Central banks, such as the Federal Reserve System banks in the United States and Bank of England in the United Kingdom, are strong players in public finance, acting as lenders of last resort as well as strong influences on monetary and credit conditions in the economy.
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