KRIZ T.

ELMIDO BSA II-A

AEC 219 FINANCIAL MARKETS
ACTIVITY 1
Research on the financial markets around the world.
A.)Determine which of them have been greatly affected by the pandemic issue and to what
extent.
ANSWER:
The U.S. Securities and Exchange Commission mandated the creation of market-wide
circuit-breakers to prevent a repeat of the Oct. 19, 1987 market crash, in which the Dow plunged
22.6%. Since then, they have only been triggered once in 1997 before the four times this March.
The S&P 500 triggered level 1 market wide circuit breakers during the opening hour on March 9,
12 and 16 based on drops of 7% from the previous close, and tripped later in the day on the 18th.
Trading also halts on both the Dow and the Nasdaq when a circuit-breaker is triggered on the
S&P 500. The Dow and S&P 500 have both been seeing drops due to uncertainty around the
global coronavirus pandemic, while the Chicago Board of Exchange Volatility Index has been
rising steadily since the middle of February as the virus began to spread around the world.
B.)Has cross-border financing able to measure the growth of finance to the size of world
economy?
ANSWER:
Yes cross-border financing can measure the growth of finances to the size of world economy.
Cross border financing are lending activities, such as loans, acceptances, or letters of credit that
originate in one country for the benefit of an individual or entity in another country. Used
extensively by multinational corporations that must be able to finance operations in multiple
countries. The funding of current-account imbalances by net international financial flows can
support welfare-enhancing consumption smoothing and efficient international capital allocation.
In addition, gross international financial flows provide an important mechanism by which
international risk diversification can be implemented, while also enabling more intense
competition in the provision of financial services. Cross border financing advanced our
understanding of risks and vulnerabilities embedded in cross-border financial positions.

Activity 2
Make a summary of your research with the following topics covered:
A.) Seven known financial markets around the world.
1. London Stock Exchange - the largest stock exchange in Europe.
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AEC 219 FINANCIAL MARKETS
2. The London bullion market - the world's largest location for gold and silver wholesale
trading.
3. SIX Swiss Exchange - is in Zurich and is the 10th largest in the world (market
capitalization of $1.6 trillion as of March 2018).
4. New York Stock Exchange (NYSE) - the largest stock exchange by market
capitalization.
5. Hong Kong Stock Exchange - the sixth largest in the world, according to World Atlas.
6. Japan Exchange Group (JPX) - Japanese financial services corporation that operates
multiple securities exchanges including Tokyo Stock Exchange and Osaka Securities
Exchange.
7. Frankfurt Stock Exchange - among the world’s largest stock exchanges. The exchange's
total turnover is 5.2 trillion euros per year, making it the world’s third largest market and
sixth largest in terms of market capitalization.
B.) World stock market
The world stock market is a set of exchanges and markets who trade and issue bonds,
equities and various other securities. An integral part of the global economy, it affords
companies and investors the access to a transaction of capital for a certain amount of legal
ownership.
C.)International bond market, Eurobonds and Eurocurrencies.
International Bond Market - The bond market is a financial market where participants buy
and sell debt securities, usually in the form of bonds.
A bond issued in a country or currency other than that of the investor or broker. They include
Eurobonds, which are issued in a foreign currency, foreign bonds, which are issued by a
foreign government or corporation in the domestic market, and global bonds, which are
issued in both domestic and international markets.
Eurobonds - the Eurobond market is part of the international capital market and involves
lending and borrowing for a periods of more than a year. A Eurobond is a bond that is sold
by a government, institution or company in a currency that is different from the country
where the bond is issued.
Eurocurrencies - Eurocurrency is currency deposited by national governments or
corporations, outside of its home market. Commonly it is currency held in banks located
outside of the country which issues the currency.
D.)Factors affecting the long-run trends of increased financial market activity.
1. Government - Government holds much sway over the free markets. The fiscal and
monetary policies that governments and their central banks put in place have a profound
effect on the financial marketplace.
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AEC 219 FINANCIAL MARKETS
2. International Transactions - The flow of funds between countries effects the strength of
a country's economy and its currency. Countries that predominantly export, whether physical
goods or services, are continually bringing money into their countries. This money can then
be reinvested and can stimulate the financial markets within those countries.
3. Speculation and Expectation - Speculation and expectation are integral parts of the
financial system. Expectation of future action is dependent on current acts and shapes both
current and future trends.
4. Supply and Demand - Supply and demand for products, services, currencies and other
investments creates a push-pull dynamic in prices. Prices and rates change as supply or
demand changes.
E.) Categories of investors
1. Active Investors - active investors stay abreast of their stocks' performance, do a lot of
research and keep up with the daily financial news. They don't necessarily buy one day and
sell the next, but they do pay attention to changes in trends and buy or sell based on those
trends.
2. Passive Investors - This kind of investor doesn't try to go for the biggest possible gains at
all times. Instead, the passive investor accepts reasonable gains in exchange for a lower stress
level and more free time.
3. Speculators - Some investors look for a chance to make money fast. They search the
market for stocks that are poised to go up because of an impending deal.
4. Retirement Investors - People investing for retirement tend to change their tactics as they
approach retirement age. This involves buying riskier stocks that have the potential for
growth.
F.) Major types of International credit market
1. Eurocredits - trading currencies that are tied to the London Inter-Bank Offer Rate
(LIBOR), which is the rate of interest offered by the largest and strongest London-based
banks on large deposits. Eurocredits tend to be issued for a fixed term with no early
repayment.
2. Eurobond - The Eurobond market is the medium- to long-term international market for
both fixed- and floating-rate debt. Eurobonds are international bonds underwritten by an
international bank syndicate andsold to investors in countries other than the one in whose
currency the bond is denominated.
3. Foreign bond - is issued in the domestic capital market of the country in whose currency
the bond is denominated, and it is underwritten by investment banks from the same country.
The only thing foreign about a foreign bond is the borrower’s nationality.
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AEC 219 FINANCIAL MARKETS
G.) International standards for financial markets
International Organization of Securities Commissions (IOSCO) is not the only international
standard setter in the capital markets. The International Accounting Standards Board comes
to mind. IOSCO, however, rose to prominence through the International Monetary Fund
(IMF)/World Bank Financial Sector Assessment Program (FSAP)

ASSESSMENT: Answer briefly.

1. In what way do global financial markets help government individuals, business and
investors?
ANSWER:
Global financial markets helps the Government individual, business and investors
because Financial markets help to efficiently direct the flow of savings and investment in
the economy in ways that facilitate the accumulation of capital and the production of
goods and services. The combination of well-developed financial markets and
institutions, as well as a diverse array of financial products and instruments, suits the
needs of borrowers and lenders and therefore the overall economy. Financial markets
instruments and institutions provide opportunities for investors to specialize in particular
markets or services, diversify risks, or both.

2. Explain the development of financial instruments in the international markets.

ANSWER:
KRIZ T. ELMIDO BSA II-A
AEC 219 FINANCIAL MARKETS
The implementation of the single market and the introduction of the euro have
strengthened competitive pressure and increased flexibility in the EU economies.
Furthermore, they have also had a clear impact on global markets, prompting further
integration of international financial markets. In other words, it is clear that
developments in financial markets have contributed to a more efficient allocation of
capital. This is also to the benefit of pension funds. On the other hand, the integration of
the financial markets and the technological developments have substantially increased
the risk of contagion in the event of a financial crisis. It is necessary therefore for
governments and authorities to continue to co-operate to create regulations and
institutions for the purpose of minimising financial risk.

ASSIGNMENT: Answer briefly.

1. Describe the nature of operations of insurance companies.
ANSWER:
Insurance means the act of securing the payment of a sum of money in the Event
of loss or damage to property, life, a person etc., by regular payment of premiums.
Insurance is a method of spreading over a large number of persons, a possible financial
risk too serious to be conveniently sustained by an individual. The nature of insurance
depends on the nature of the risk required to be protected.

2. Give and explain briefly the three main types of finance companies.
ANSWER:
The three types of finance companies are business, consumer, and sales. Business
finance companies finance accounts receivable (often through an Arrangement called
factoring) and provide inventory loans and leases. Consumer finance companies Make
loans to high-risk customers for the purchase of autos and appliances and to refinance
other debt. Sales finance companies finance a firm’s sales, often through in-house credit
or credit cards.
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AEC 219 FINANCIAL MARKETS
3. What is considered the most important and significant financial intermediary in our
financial system.
ANSWER:
A financial intermediary is an entity that facilitates a financial transaction
between two parties. Such an intermediary or a middleman could be a firm or an
institution. The most important and significant financial intermediary in our financial
system is the Commercial banks because they are licensed to accept deposits, give loans
and offer many other financial services to the public. They play a major role in the
economic stability of a country, and thus, face heavy regulations.