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Financial Institutions
Dr. John Kuforiji
Section 101
Bader Al-Hamed
ID: 200901007
Homework Assignment:
FINA 3312: Financial Markets and Institutions
Financial institutions in Saudi Arabia:
1- Saudi Arabian General Investment Authority (SAGIA)
2- Saudi Industrial Development Fund (SIDF)
3- The Islamic Development Bank Group (IDB)
4- The Saudi Export Program (SEP)
5- The Saudi Fund for Development (SFD)
Get an annual report of one of the firms in the financial institution industry and write a
half a page summary on the firm’s activities and services.
Saudi Arabian General Investment Authority (SAGIA)
As the fastest growing economy in the Middle East, with $624 billion earmarked in diverse
projects by the year 2020, never before has the Kingdom focused on its diversification progress
so assertively. Assisted by positive economic indicators and international rankings such as the
World Bank’s comprehensive ‘Doing Business 2008’ that ranks Saudi Arabia: 23rd out of 178
countries for ease of doing business, 7th for ease of paying taxes, 3rd for ease of registering
property and 1st in the MENA region for ease of attracting Foreign Direct Investment (FDI);
bold and innovative measures are in place to assist business practice and make the Kingdom an
appealing destination for foreign investors.
Having already risen from 67th to 11th in the World Bank / International Finance
Corporation’s Ease of Doing Business rankings in the span of five short years, Saudi Arabia is
committed to becoming one of the world’s most competitive economies for the attraction of FDI
(Foreign Direct Investment).
What are the Fed Monetary Policy tools?
1- The Federal Reserve
2- The Federal Open Market Committee
3- The Discount Rate
How do Fed. Control money supply?
1- By buying or selling government securities so when they buy, money in commercial banks
increase, which means more money in economy.
2- Use of Repurchase Agreement.
3- Purchase of securities such as T-Bill increases its price and lowers its yield. Bank interest rate
will also decrease; this encourages more borrowing by corporations and individuals. Fed can also
increase interest rate through opposite trading strategy.
4- Adjusting the Reserve Requirement Ratio.
What are the impacts of Fed. Monetary Policies on the economy?
1. Correcting a Weak Economy
a. Fed can stimulate the economy by creating a loose-money policy and engages in
1) Buying government securities
2) Lowering the discount rate
3.) Lowering the reserve requirement
2. Correcting High Inflation
a. The Fed can constrain economic activity when it creates a tight-money policy and
1.) Sells government securities
2.) Raises the discount rate
3.) Increases the reserve requirement
What are the trades-offs of Fed Monetary Policies.
1- The lower the unemployment, the greater the inflation and the higher the unemployment, the
lower the inflation.
2- When inflation is high, tight money policy is considered so the trade off is higher
unemployment.
3- When unemployment is high, loose-money policy is considered. Trade off is higher inflation.
List six (6) money market securities (instruments).
1- Treasury Bills
2- Commercial Paper
3- Negotiable Certificates of Deposit (NCDs)
4- Repurchase Agreements
5- Federal Funds
6- Banker's Acceptances
Write short notes on each of the six listed money market instruments.
1- Treasury Bills:
a. Investing in Treasury Bills
b. Pricing Treasury Bills
c. Treasury Bill Auction
d. Estimating the Yield
2- Commercial Paper:
a. Ratings
b. Volume of Commercial Paper
c. Placement
d. Backing Commercial Paper
e. Estimating the Yield
f. Commercial Paper Yield Curve
3- Negotiable Certificates of Deposit (NCDs:
a. Placement
b. Premium
c. Yield
4- Repurchase Agreements:
a. Placement
b. Estimating the Yield
5- Federal Funds: federal funds are overnight borrowings by banks to maintain their bank
reserves at the Federal Reserve.
6- Banker's Acceptances: there are steps involved in Banker's Acceptances.
List six (6) capital market securities (instruments).
1- Stocks
2- Bonds
3- Debentures
4- Treasury Bills
5- Foreign Exchange
6- Fixed Deposits
Write short notes on each of the six listed capital market instruments.
1- Stocks: Corporations, governments, and companies issue securities on the stock market to
collect funds.
2- Bonds: Such as Municipal Bonds
3- Debentures: It's considered as unsecured investment because there are no pledges (guarantee)
or available on particular assets.
4- Treasury Bills: It does not yield any interest before they mature.
5- Foreign Exchange: The major determinant of the exchange rate is the monetary value of the
currency.
6- Fixed Deposits: The minimum maturity period for public deposits is 6 months.
How are the risks of the money market securities measured and evaluated?
By credit and liquidity:
– Zero tolerance for credit migration
– Liquidity on demand
– Headline risk
How are the risks of the capital market securities measured and evaluated?
The technical, statistical and behavioral characteristics of the models used by major derivatives
intermediaries are, in principle, well-equipped to provide estimates of "risk of loss" or "capital at
risk" associated with a given portfolio of OTC derivative products. That is, given any portfolio of
OTC derivative products on any day of the week, it is a relatively straightforward matter to
estimate with a particular statistical probability what future losses might be associated with the
portfolio, based on the correlations and covariance's that lie behind the parameters and
coefficients in such models.