Bryan Hoo's Blog - Posts Tagged "finance"
Financial Market Failures
Alright, it is lesson time again. We will talk about the topic about "Financial Market Failures" in this week. Enjoy~🤓
Financial market failures refer to situations where financial markets fail to operate efficiently, causing lost economic output and reductions in the value of national wealth.
Failure of the price mechanism
When a financial market fails, it means that the price mechanism does not work effectively. A significant function of the price mechanism is to allocate goods and services a price, but in financial markets, the prices of assets may not reflect the full range of costs and benefits associated with owning, or trading in, those assets. For example, failing to establish the ‘risk’ associated with holding a financial asset may cause a divergence between the market (or traded) value of the asset, and the true value. This can distort decision making and lead to a misallocation of resources.
Failure#1: Asymmetries and information failure
The most significant market failure affecting financial markets is the failure to provide sufficient information to make rational choices about the value of an asset. Information failure may affect the buyer or seller, or both parties.
One feature of financial markets in the period preceding the financial crash was the emergence of new types of security, and hence new types of risk. Low interest rates and poor yields from ‘safe’ government bonds meant that global investors were looking for new assets to invest in.
Failure#2: Moral hazard
The failure to understand the level of risk associated with securitised assets was compounded by the assumption by many financial institutions that they were ‘too big or too important’ to fail, and hence would be bailed out should the need arise. This encouraged further risk taking above and beyond a rational level. In this case, the central bank – in its role of lender of last resort – was seen as an ‘insurance policy’ should the financial institutions suffer excessive losses from imprudent lending.
Okay, that is all from today lesson. More and more interesting topics will be discussed in the future. Stay Tune~☺️
Sign Up for our Newsletter and receive a Mysterious Gift by clicking this link: https://bryanandrobertpublishing.com
#financialmarket #finance #financial
Financial market failures refer to situations where financial markets fail to operate efficiently, causing lost economic output and reductions in the value of national wealth.
Failure of the price mechanism
When a financial market fails, it means that the price mechanism does not work effectively. A significant function of the price mechanism is to allocate goods and services a price, but in financial markets, the prices of assets may not reflect the full range of costs and benefits associated with owning, or trading in, those assets. For example, failing to establish the ‘risk’ associated with holding a financial asset may cause a divergence between the market (or traded) value of the asset, and the true value. This can distort decision making and lead to a misallocation of resources.
Failure#1: Asymmetries and information failure
The most significant market failure affecting financial markets is the failure to provide sufficient information to make rational choices about the value of an asset. Information failure may affect the buyer or seller, or both parties.
One feature of financial markets in the period preceding the financial crash was the emergence of new types of security, and hence new types of risk. Low interest rates and poor yields from ‘safe’ government bonds meant that global investors were looking for new assets to invest in.
Failure#2: Moral hazard
The failure to understand the level of risk associated with securitised assets was compounded by the assumption by many financial institutions that they were ‘too big or too important’ to fail, and hence would be bailed out should the need arise. This encouraged further risk taking above and beyond a rational level. In this case, the central bank – in its role of lender of last resort – was seen as an ‘insurance policy’ should the financial institutions suffer excessive losses from imprudent lending.
Okay, that is all from today lesson. More and more interesting topics will be discussed in the future. Stay Tune~☺️
Sign Up for our Newsletter and receive a Mysterious Gift by clicking this link: https://bryanandrobertpublishing.com
#financialmarket #finance #financial
The Four Must-Watch Movies About Finance
Okay, this is lesson time again. We will discuss about the topic of "The Four Must-Watch Movies About Finance". Enjoy~😆
Movie#1: The Big Short (2015)
Based on the nonfiction book The Big Short: Inside the Doomsday Machine by Michael Lewis, this movie follows a few savvy traders as they become aware—before anyone else—of the housing bubble that triggered the financial crisis in 2007-2008.
The movie is known for its clever way to break down sophisticated financial instruments by, for example, having Selena Gomez explain what synthetic CDOs are at a poker table, or having Margot Robbie explain mortgage-backed bonds in a tub with champagne.
Movie#2: American Psycho (2000)
A violent and thought-provoking thriller set in the backdrop of finance, Christian Bale plays a wealthy investment banker with a dark secret in the film adaption of the Bret Easton Ellis novel. While there is very little actual finance in this movie, American Psycho does shed light on the surreal world inhabited by finance’s elite class, and the utter disconnect they have among themselves and with reality.
Movie#3: Rogue Trader (1999)
This movie tells the story of Nick Leeson, a trader who single-handedly caused the insolvency of Barings Bank, the world’s second-oldest merchant bank. A rising star on the Singapore trading floor, Leeson blew up as quickly as he rose, hiding enormous losses from his superiors in carefully hidden accounts, eventually leading to the mother of all failed trades on a short straddle position on the Nikkei, which ends up experiencing a large sigma move.
Movie#4: Wall Street (1987)
Surprise, surprise: the number one finance movie every professional must see is the Oliver Stone classic that got thousands of college graduates to utter the immortal phrase “Blue Horseshoe loves Anacott Steel” as they rushed to their Series 7 exams. Originally crafted to show the excess and hedonism associated with finance, Wall Street still wields incredible power as a recruiting tool for traders, brokers, analysts, and bankers nearly 30 years after it was made.
Although the movie serves to warn us about the dangers of insider trading, let’s face it, who wouldn’t want to be Bud Fox or even Gordon Gekko (legitimately, of course) and indulge a bit in our greedy side; after all, as Gekko would say, “Greed is good.”
Okay, that is all from today lesson. More and more interesting topics will be discussed in the future. Stay Tune~😚
Sign Up for our Newsletter and receive a Mysterious Gift by clicking this link: https://bryanandrobertpublishing.com
#stockmarket #wallstreet #gordongekko #finance
Movie#1: The Big Short (2015)
Based on the nonfiction book The Big Short: Inside the Doomsday Machine by Michael Lewis, this movie follows a few savvy traders as they become aware—before anyone else—of the housing bubble that triggered the financial crisis in 2007-2008.
The movie is known for its clever way to break down sophisticated financial instruments by, for example, having Selena Gomez explain what synthetic CDOs are at a poker table, or having Margot Robbie explain mortgage-backed bonds in a tub with champagne.
Movie#2: American Psycho (2000)
A violent and thought-provoking thriller set in the backdrop of finance, Christian Bale plays a wealthy investment banker with a dark secret in the film adaption of the Bret Easton Ellis novel. While there is very little actual finance in this movie, American Psycho does shed light on the surreal world inhabited by finance’s elite class, and the utter disconnect they have among themselves and with reality.
Movie#3: Rogue Trader (1999)
This movie tells the story of Nick Leeson, a trader who single-handedly caused the insolvency of Barings Bank, the world’s second-oldest merchant bank. A rising star on the Singapore trading floor, Leeson blew up as quickly as he rose, hiding enormous losses from his superiors in carefully hidden accounts, eventually leading to the mother of all failed trades on a short straddle position on the Nikkei, which ends up experiencing a large sigma move.
Movie#4: Wall Street (1987)
Surprise, surprise: the number one finance movie every professional must see is the Oliver Stone classic that got thousands of college graduates to utter the immortal phrase “Blue Horseshoe loves Anacott Steel” as they rushed to their Series 7 exams. Originally crafted to show the excess and hedonism associated with finance, Wall Street still wields incredible power as a recruiting tool for traders, brokers, analysts, and bankers nearly 30 years after it was made.
Although the movie serves to warn us about the dangers of insider trading, let’s face it, who wouldn’t want to be Bud Fox or even Gordon Gekko (legitimately, of course) and indulge a bit in our greedy side; after all, as Gekko would say, “Greed is good.”
Okay, that is all from today lesson. More and more interesting topics will be discussed in the future. Stay Tune~😚
Sign Up for our Newsletter and receive a Mysterious Gift by clicking this link: https://bryanandrobertpublishing.com
#stockmarket #wallstreet #gordongekko #finance
