Larry Harris

Los Angeles, CA, U.S.A.


After completing this chapter, you will be able to do the following:

  • Explain and illustrate the main functions of the financial system.
  • Describe classifications of assets and markets.
  • Describe the major types of securities, currencies, contracts, commodities, and real assets that trade in organized markets, including their distinguishing characteristics and major subtypes.
  • Describe the types of financial intermediaries and the services that they provide.
  • Compare and contrast the positions an investor can take in an asset.
  • Calculate and interpret the leverage ratio, the rate of return on a margin transaction, and the security price at which the investor would receive a margin call.
  • Compare and contrast execution, validity, and clearing instructions.
  • Compare and contrast market orders with limit orders.
  • Describe the primary and secondary markets and explain how secondary markets support primary markets.
  • Describe how securities, contracts, and currencies are traded in quote-driven markets, order-driven markets, and brokered markets.
  • Describe the characteristics of a well-functioning financial system.
  • Describe the objectives of market regulation.


Financial analysts gather and process information to make investment decisions, including those related to buying and selling assets. Generally, the decisions involve trading securities, currencies, contracts, commodities, ...

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