Finance Essay Example for Free

Finance EssayQuiz 11. The raw fundamental data on the human genome thunder mugnot be patented only if the genes and gene-based discoveries can. 2. The map of the human genome produced by Collins and his co-workers is available from the internet for free all over the world. In other(a) words, the map of the human genome created by the HGP is a public good. 3. Celera genomics has no patent over the human genome. However, celera does have proprietary rights over its version of that genome. It is private good. Quiz 21. Any new musical theme applicable to the essential function of finance is termed a monetary innovation. This is the loosest possible definition of pecuniary innovation. Credit card automatic teller machines venture capital letter firms. 2. The distinguishing feature of modern banking emerges from the financial innovation known as securitization, namely banks pool assets (from mortgages to car loans) and sell the repackaged assets. Securitized debt is one of the f inancial innovations at the heart of the financial crisis 2007-08, and refers to the creation of bonds of different seniority (known as tranches) that are fixed-income claims backed by collateral in the form of large portfolios of loans (mortgages, car loans, credit cards, etc.). 3. The CDSs are restitution contracts. The main function of the CDSs is to hedge against default. More specifically, the buyer of the CDS makes payments to the seller in order to receive protection. The buyer receives a payment if a credit factor (for example, a loan or a bond) goes into default or in the case of a specified credit event such as bankruptcy. In particular, CDSs allow people to insure against the failure of new-fangled financial products.Quiz 31. Real A financial innovation that provides economically valuable benefits constitutes a current financial innovation. Concrete examples of real financial innovations are the Credit Card and the ATM. Nominal Nominal financial innovations are financi al instruments that increase compensation without providing unchanging economic benefits. Toxic A toxic (or economically malignant) financial innovation is a nominal financial innovation which singly or jointly with other financial innovations provokes a financial crisis. Sub-prime mortgage innovation. It is generally agreed that the sub-prime mortgage innovation in combination with other financial innovations and factors led to the financial crisis 2007-08, and thus, the sub-prime mortgage is an example of toxic financial innovation.Quiz 51. Risk means that we can work out the probability statistical distribution of a particular event. For example, when you buy a lottery ticket there is risk in the sense that you can compute the probability of winning a prize. Uncertainty means that the probability distribution of an event cannot be computed because there is not enough information. For example, suppose that you buy a scratchy that offers among other prizes a maximum reward of $25 0,000 and that you want to compute the probability of winning this prize after one day of the release of the scratchies. In this case, you experience uncertainty because you have no way of knowing whether soul else has already won the maximum prize, and therefore, you cannot compute a unique probability of success. 2. The fundamental reason serving to account for the metamorphosis of risk into Knightian uncertainty can be easily understood the investors (for example, mutual funds) who bought the CDOs had no real comprehension of the size and location of the risks underlying these financial products.Quiz 61. The loosest possible definition of shadow banking system is the collection of financial institutions and activities that in some respects resemble banking activities but are subject to less regulation than commercial banks. 2. The investor lends $D for interest (i %) to the financial firm and requires collateral.The financial firm gives CDOs as collateral and agrees to recuperat e the CDOs some time later for $E, where E = D +iD The preceding financial trade is known as sale repurchase agreement, or briefly, repo agreement