5- MONEY, FOREIGN EXCHANGE, FINANCE.

What is Finance?

The financial system deals with financial transactions and the exchange of money between savers, investors, lenders and borrowers.

What is Financial System?

They are made up of different models that link financial institutions and markets to provide financial services to the different stakeholders that operate in the financial system like lenders, borrowers, government and others.

What are the functions of a financial system?

It obtains resources from entities that have surpluses and distributes them to those who seek financing.

 It establishes a regulatory framework that protects investors’ savings.

 Promote the healthy growth of the economy.

How are the main types of financial institutions categorized? Describe each one.

A financial institution is a for-profit company whose activity is the provision of financial services to the economic agents of the company.

Currently financial systems are classified into two types:

Banking and non-banking institutions

Banking institutions: This type of entity can collect funds from the public in the form of money or financial resources of different types.

Its main activity is to raise funds from agents with surplus capital, to lend it to agents with deficits. In addition, they can also grant guarantees and endorsements, issue electronic money or make bank transfers among other activities.

Which are the main classes of financial instruments issued in a financial system? Descrone them in detail.

Non-complex financial instruments this includes equities, debt securities and certain types of mutual funds.

Equity securities refer to company stocks.

 Debt securities include government bonds (public debt) and corporate bonds (private debt). Debt securities can also refer to preferred stocks and secured securities, such as secured debt obligations (CDOs).

 Mutual funds include hedge funds and mutual funds. These instruments allow several investors to pool their money under the responsibility of a specialist or company that manages it: the fund manager. Typically, the manager will make decisions on behalf of investors.

Complex financial instruments

They are those whose value depends not only on supply and demand, but on a series of factors that act at the same time; for what they require a deep knowledge to be able to be handled successfully. The most widely traded complex financial instruments are derivatives.

What are the distinctions between various types of financial markets according to their function? Explain them.

Financial markets are a type of market, along with the market for consumer products, the market for consumer products, the market for services, and the market for industrial products.

Money market.

Capital market. Within the capital market are these two markets: fixed income markets and equity markets.

Financial derivatives market. They are in turn divided into:

Organized markets: They are standardized and controlled by a clearinghouse. Inside we find mainly the financial futures market and the financial options market.

Unorganized markets (OTC).

 Financial market of raw materials (commodities).

Currency market (Forex market).

Spot market.

Insurance market.

Interbank market. Although it is generally integrated within the money market, due to its size and importance, it is sometimes classified as another separate financial market.

Cryptocurrency market.

What does the “flow of funds” refer to? Explain in detail.

Your business cash flow is a measure of the money going in and out of your business. … Cash outflows, which are the money that leaves your company, such as money spent on supplies, loans and personnel.

Write a final reflection on the topic, mentioning what were the most important aspects you learned.

It is a very important topic and it would be good for many people to know about it since many of them do not know or do not know the subject at all, in past subjects I had already seen about this subject and it still seems very interesting to me since for my career And what I would like to dedicate to when I start working will have a lot to do with these issues.