Financial Markets at Universität St. Gallen | Flashcards & Summaries

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Lernmaterialien für Financial Markets an der Universität St. Gallen

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Global Equity Market Capitalization


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Size: 103 trillion USD (2021): US 40%, EMEA 22%, China/Hong Kong 17%

Market shares have been fairly stable – except in Asia where markets have highly developed in the recent years versus Japan for instance

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Global Stock Market Trading


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Where trading occurs is related to where equity is capitalized (e.g. US biggest capitalization & NYSE biggest exchange).

Total trading volume more or less stable. 2009: 75.3 to 2020: 91.4 trillion USD

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Changing Global Stock Markets - NYSE

What ? Why?

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  • 2007 Domination by NYSE at >30% --> 2018 at 20% (after acquisition of other exchanges to keep its market share). Domination has ended, NYSE not able to stabilize the market share despite buy up of other markets
  • Why domination has ended?

1) New development of new market places/platforms (BATS exchange = ”Alternative Trading Systems”, electronic communication networks) which have managed to pick up significant market share

2) Shift to different markets of previously minor significance (e.g. Shenzhen SE)

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Bid Definition

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buy offer (# securities the buyer is willing to buy at what price) --> bid price = highest price a buyer is willing to offer for a security

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"Ask" definition

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sell offer (# securities the seller is willing to sell at what price) --> ask price = lowest price a seller is willing to accept for a security

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Name the ways to place orders

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- Market Orders

- Price-Contingent Orders -> limit orders & stop orders


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What is a market order?

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Buy or sell orders that are to be executed immediately at current market prices

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Complications with market orders

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  1. Only up to a specified number of shares can be traded [are offered / available] at posted price quotes [=”depth”], after which a buyer might have to pay slightly more / a seller might receive slightly less
  2. Best price quote may change before order arrives, so the price at execution might be different from the one quoted at the moment of the order
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Limit orders?

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Place an order specifying the price at which they are willing to buy or sell. 

Limit buy order: order to buy if and when the price of a stock is at or below a specified amount. 

Limit sell order: order to sell if and when the price of a stock rises above a specified amount.

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Stop order?

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A sell order to be executed if the price of the stock falls below a specified level (aim: to set a maximal downwards risk, so if there is a crash, the securities are sold before their price drops “limitlessly”)

A stop-buy orders -> a stock should be bought when its price rises above a limit. These trades often accompany short sales (used to limit potential losses from the short position)

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To perform market transactions, which transaction costs exist?

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  • Fees & Commissions
  • Bid-ask spread : Market maker posts 2 prices, one at which he is willing to buy (lower) [bid price = price which market participants must offer to buy security] and one at which he is willing to sell (slightly higher) [ask price = price which market participants must accept to sell security] --> spread = Pask – Pbid
  • Price impact
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Global Debt Market Capitalization

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  • Total Bond Market Size (2020): 113 trillion USD with US 40%, Euro Zone (excluding UK) 20%, China/HK 14%
  • Corporate Bond Market (2020): 60 trillion USD --> represents around 50% of total, other 50% represents government bonds

(Japan has a smaller corporate bond market and a larger gov. bond market)

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Q:

Global Equity Market Capitalization


A:

Size: 103 trillion USD (2021): US 40%, EMEA 22%, China/Hong Kong 17%

Market shares have been fairly stable – except in Asia where markets have highly developed in the recent years versus Japan for instance

Q:

Global Stock Market Trading


A:

Where trading occurs is related to where equity is capitalized (e.g. US biggest capitalization & NYSE biggest exchange).

Total trading volume more or less stable. 2009: 75.3 to 2020: 91.4 trillion USD

Q:

Changing Global Stock Markets - NYSE

What ? Why?

A:
  • 2007 Domination by NYSE at >30% --> 2018 at 20% (after acquisition of other exchanges to keep its market share). Domination has ended, NYSE not able to stabilize the market share despite buy up of other markets
  • Why domination has ended?

1) New development of new market places/platforms (BATS exchange = ”Alternative Trading Systems”, electronic communication networks) which have managed to pick up significant market share

2) Shift to different markets of previously minor significance (e.g. Shenzhen SE)

Q:

Bid Definition

A:

buy offer (# securities the buyer is willing to buy at what price) --> bid price = highest price a buyer is willing to offer for a security

Q:

"Ask" definition

A:

sell offer (# securities the seller is willing to sell at what price) --> ask price = lowest price a seller is willing to accept for a security

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Q:

Name the ways to place orders

A:

- Market Orders

- Price-Contingent Orders -> limit orders & stop orders


Q:

What is a market order?

A:

Buy or sell orders that are to be executed immediately at current market prices

Q:

Complications with market orders

A:
  1. Only up to a specified number of shares can be traded [are offered / available] at posted price quotes [=”depth”], after which a buyer might have to pay slightly more / a seller might receive slightly less
  2. Best price quote may change before order arrives, so the price at execution might be different from the one quoted at the moment of the order
Q:

Limit orders?

A:

Place an order specifying the price at which they are willing to buy or sell. 

Limit buy order: order to buy if and when the price of a stock is at or below a specified amount. 

Limit sell order: order to sell if and when the price of a stock rises above a specified amount.

Q:

Stop order?

A:

A sell order to be executed if the price of the stock falls below a specified level (aim: to set a maximal downwards risk, so if there is a crash, the securities are sold before their price drops “limitlessly”)

A stop-buy orders -> a stock should be bought when its price rises above a limit. These trades often accompany short sales (used to limit potential losses from the short position)

Q:

To perform market transactions, which transaction costs exist?

A:
  • Fees & Commissions
  • Bid-ask spread : Market maker posts 2 prices, one at which he is willing to buy (lower) [bid price = price which market participants must offer to buy security] and one at which he is willing to sell (slightly higher) [ask price = price which market participants must accept to sell security] --> spread = Pask – Pbid
  • Price impact
Q:

Global Debt Market Capitalization

A:
  • Total Bond Market Size (2020): 113 trillion USD with US 40%, Euro Zone (excluding UK) 20%, China/HK 14%
  • Corporate Bond Market (2020): 60 trillion USD --> represents around 50% of total, other 50% represents government bonds

(Japan has a smaller corporate bond market and a larger gov. bond market)

Financial Markets

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