A quickie quiz Phase 2 ECN 324 Summer term 1.

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Presentation transcript:

A quickie quiz Phase 2 ECN 324 Summer term 1

Mortgage Markets What is an important difference between a conventional mortgage loan and an FHA mortgage loan? How does a second mortgage differ from a home equity line of credit? Why is marketability important to the lender? What is a pass-through security?

Equity Markets In what way does the NYSE differ from the NASDAQ? Who benefits most from an IPO? What important function does venture capital perform?

Stock Valuation Models What are the two sources of risk in Modern Portfolio Theory (MPT)? What are the two sources of risk in the Capital Asset Pricing Model (CAPM)? Why is diversification important? What is the most important implication of the Efficient Markets Hypothesis (EMH)?

Market Microstructure How does a Cash account differ from a Margin account in terms of settlement? How does a market order differ from a limit order in terms of execution? What does it mean to sell short? What are the short-seller’s expectations? How many shares in a round lot? In a block trade?

Financial Futures What expectation does the long futures position holder have? How does the short position futures make money? What is the important difference between a forward contract and a futures contract? What is meant by marking-to-market? What is basis in a futures position?

Options Markets What is the call buyers expectation regarding stock prices? Why would an investor/speculator buy a put? What does it mean if you are a naked call writer? What is intrinsic value and how does it relate to an in-the-money situation? When does an option have zero time value?

Interest Rate Futures What type of securities are involved in a swap? How does a plain vanilla swap differ from forward swap? If interest rates decline, do you want to be a borrower or a lender? Who benefits most from an interest rate cap? An interest rate floor?