Introduction to Finance and Investment

Table of Contents

1. Introduction
2. What is Finance?
3. What is Investment?
4. Types of Financial Markets
5. Basic Financial Instruments
6. Summary

Introduction

Welcome to the first course in our series on quantitative finance and investment. This introductory course will provide an overview of the key concepts in finance and investment. We will discuss the basics of finance, investment, the different types of financial markets, and some basic financial instruments.

What is Finance?

Finance is a broad term that describes activities associated with banking, leverage or debt, credit, capital markets, money, and investments. It represents the management of money and includes activities like investing, borrowing, lending, budgeting, saving, and forecasting.

What is Investment?

Investment involves the allocation of resources, typically money, with the expectation of generating an income or profit. You can invest in projects, such as a new start-up, or in assets, like stocks, real estate, or commodities. The primary goal of investment is to create wealth over time.

Types of Financial Markets

Financial markets are venues where buyers and sellers interact to trade assets. They can be physical places, like the New York Stock Exchange, or virtual places, like an electronic trading platform. There are various types of financial markets, including stock markets, bond markets, commodities markets, foreign exchange markets, and derivatives markets.

Basic Financial Instruments

Financial instruments are contracts that represent a financial asset to one party and a financial liability or equity to another. Basic financial instruments include:

• Stocks: Ownership shares in a company.
• Bonds: Debt securities issued by entities like governments and corporations.
• Derivatives: Contracts whose value is based on an underlying asset, such as a stock, bond, commodity, or currency.
• Mutual Funds: Investment vehicles that pool money from many investors to purchase a diversified portfolio of assets.

Summary

This course provided a basic introduction to finance and investment. We covered the definitions of finance and investment, explored the different types of financial markets, and looked at some basic financial instruments. As we move through this series, we’ll delve deeper into these topics and learn how to analyze and make decisions about financial investments.

Stay tuned for our next course: Basic Statistical Concepts for Investment!