Flashcard Set Preview
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| 1 |
To evaluate the quality of a market, one should examine its
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liquidity,
transparency, and assurity of completion.
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| 2 |
A liquid market has
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small bid-ask spreads, market depth, and
resilience.
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| 3 |
If a market has small spreads, traders are apt to
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trade more often.
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| 4 |
Market depth allows larger orders to trade without
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affecting security prices.
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| 5 |
A
market is resilient if asset prices
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stay close to their intrinsic values, and
deviations from intrinsic value are quickly minimized.
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| 6 |
In a transparent market, investors can easily and quickly obtain
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pre-trade and post-trade information.
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| 7 |
If a market is not transparent, investors
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lose faith in the market and decrease their trading activities.
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| 8 |
When markets have assurity of completion, investors can be confident
that
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the counterparty will uphold their side of the trade agreement.
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| 9 |
To
facilitate this, brokers and clearing bodies may provide
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guarantees to both
sides of the trade.
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