Question

1) List and explain 4 types of nonbank financing 2) Explain the 4 types of derivatives and give an example of each.

Answer 1

4 types of non bank financing are

1. Commercial loan , so they provide loans same as banks but they don't have banking licence means they can deposit people's money but they can lend like a private lender.

2. Social funding, you can take loan from a social group or social union .

3. Joint venture , Getting capital by entering into partnership or joint venture agreement

4. Equity financing , you can sell shares of your company and thus raise capital

4 types of derivatives are

1. Futures , it an agreement which says that buyer will buy a certain no. of share at certain time and price in future. The money to buy those shares need to be paid in future and not today, just the agreement is signed.

2. Options, it gives buyer a right to buy or sell shares in future at certain price . it's buyer's right and not an obligation

3. Forward, Forwards are like future agreement only. It just an over the counter agreement means its not traded on exchange like futures.

4. Swap, its an agreement in which two parties exchnage with each other. They can exchange interest payments, currency payments , equity returns .