The Economics and Financial Education Program

    A bank stress test is an analysis conducted under hypothetical scenarios designed to determine whether a bank has enough capital to withstand a negative economic shock. These scenarios include unfavorable situations, such as a deep recession or a financial market crash. In the United States, banks with $50 billion or more in assets are required to undergo internal stress tests conducted by their own risk management teams and the Federal Reserve . The goal is to ensure that banks can continue to supply credit to households and businesses even during severe economic and financial distress. Key Areas Banks prepare for stress tests through a meticulous and multi-faceted process. Initially, they create a range of adverse economic scenarios that could potentially impact their financial stability. These scenarios often include economic downturns and market shocks. To assess the impact of these hypothetical situations, banks employ complex computer simulations, which proj...

  An investment company can be a corporation, partnership, business trust or limited liability company (LLC) that pools money from investors on a collective basis. The money pooled is invested, and the investors share any profits and losses incurred by the company according to each investor’s interest in the company.   Investment companies are categorized into three types: closed-end-funds, mutual funds (or open-end funds) and unit investment trusts (UITs). Each of these three investment companies are registered with and regulated by the Securities and Exchange Commission (SEC) under the Investment Company Act of 1940. Mutual funds are a popular way to diversify an investment portfolio without buying individual stocks,bonds, and other securities. Funds that issue an unlimited number of shared based on investor demand are called open-end-funds, while close-end-funds issue a fixed number of shares at an initial public offering (IPO). Both funds pool investor money to inves...

  Exchange – Traded Product (ETP) Exchange- traded products (ETPs) are instruments that track underlying securities, an index, or other financial products. ETPs trade on the exchanges similar to stocks, meaning shares can be purchased, and prices can fluctuate through a trading day. ETPs share price are derived from the underlying investments that they track. Exchange-traded products can be benchmarked to myriad investment, including commodities, currencies, stock and bonds. ETPs may contain a few or hundreds of underlying investments. Here are the types of ETPs trading on the market. Exchange-Traded Fund (ETF) An exchange -traded fund (ETF) is a pooled investment security that can be bought and sold like an individual stock. ETFs can be structured to track anything from the price of a commodity to a large and diverse collection of securities.   ETFs can be designed to track specific investment strategies. Various types of ETFs are available to investors for income gen...

    Secure funding for a corporation can be done through either public markets or private markets, and each has a distinct characteristic. Public Market Access to Capital Public markets provide access to a large pool of capital by allowing the general public to invest in a company’s shares or debt. Liquidity   Shares traded on public markets are highly liquid, meaning that they can be bought and sold easily on stock exchanges. Regulatory Requirements   Companies must adhere to strict regulatory standards, including regular financial reporting and disclosure to the Securities and Exchange Commissions (SEC). Market Valuation   The value of a company is continuously determined by the market, reflecting in the share price. Investor Base   A public company can attract a diverse range of investors, including institutional and retail investors. Private Market Investor Profile   Private markets typically involve investments from a...

  Private securities are investable assets issued by a privately owned company in accordance with exemptions from the Securities and Exchange Commission (SEC) registration requirements. Private securities allow private companies to raise capital from a limited number of accredited investors to start or grow their business. Although private securities are exempt from registration with the SEC, issuers of private securities are still subject to all of the anti-fraud provisions of the Securities Act of 1933.  Private securities encompass various types of securities, such as stocks, bonds, or debt.  Here are some key points to understand. Exemption from Registration. Unlike publicly traded securities (which require SEC registration) private securities can be bought and sold between parties without an intermediary or through a broker-dealer. Private securities are not freely available for trading on open markets like stocks listed on major exchanges (e.g., the New York Stock E...