Learning objectives: Describe how fintech innovations have begun to leverage the execution and stakeholder value associated with payments settlement, cryptocurrencies, blockchain technologies, and cross-border payment services. Examine the issues with respect to investments, financial markets, trading, risk management, robo-advisory, and related services that are influenced by blockchain and fintech innovations.
Questions:
907.1. The paper On the Fintech Revolution (by Gomber, Kauffman, Parker, and Weber) contain several fintech or fintech-related concepts and definitions, including the following five concept pairs:
I. Delayed net settlement (DNS) accumulates payments that can be netted against one another before irrevocable funds are made available; DNS minimizes the need for additional liquidity but also makes the delay of funds availability likely at times. In contrast, the real-time gross payment systems (RTGS) approach supports the irrevocable availability of funds immediately, but requires the need for central bank involvement to inject intraday liquidity.
II. Blockchain is a distributed ledger technology that is closely associated with digital ledger technology (DLT) which is the use of decentralized digital trust verification through encrypted digital signatures
III. Initial coin offerings (ICOs) enable investors to acquire ownership of cybercurrency tokens in a start-up venture which permits the entrepreneurs to bypass the typical reporting, due diligence and regulations associated with initial public offerings (IPOs). Smart contracts are self-executing contracts whose terms are written in code and stored on a blockchain network.
IV. Centripetal forces lead to agglomeration (market linkages, local knowledge externalities, thick labor markets, and national regulations) but centrifugal forces lead to globalization of the industry with punctuated equilibria of local innovations that are spun off for increasingly international R&D-driven service transformation
V. Know your customer (KYC) compliance requires financial institutions to verify the identity of their clients. All banks in the U.S. must demonstrate KYC procedures, develop customer identification programs (CIP), and implement detailed transaction monitoring; the purpose is to avoid bank involvement, however unintentional, in criminal money laundering activities
Which of the above definitions is (are) correct?
a. None of the definitions are correct
b. Only I., III., and V. are correct; i.e., II. and IV. are inaccurate
c. Only II. and IV. are correct; i.e., I., III. and V. are inaccurate
d. All five definitions are correctly specified
907.2. In regard to risk management, blockchain and regulatory considerations in markets, each of the following statements is TRUE except which is inaccurate (according to Gomber et al)?
a. The biggest pain points for investment firms includes regulatory compliance and dealing with legacy systems
b. Blockchain is a potential game-changer but, with respect to clearing and trading, multiple technical and non-technical implementation hurdles remain unsolved
c. The most productive and successful recent academic research has been (i) the identification of causes of flash crashes and (ii) developing methods to manage cyber risk during extreme market events
d. With respect to regulators, in the last decade numerous new regulations have generated massive amounts of data, but regulators often cannot adequately process and analyze these massive amounts of data
907.3. With respect to the changing landscape of investments in the fintech world, each of the following statements is true EXCEPT which is inaccurate (according to Gomber et al)?
a. High automation finance will utilize big data to generate innovative user experiences including just-in-time financial literacy and personal digital financial twins
b. Robo-advisors replace financial advisors by unwinding fallacies inherent to modern portfolio theory (MPT) and by addressing the personal aspects of financial investments such as tax and insurance
c. A social trading platform is a combination of a social network and a trading platform that offers its users the possibility to share their investment ideas and/or copy the ideas/trades other users
d. Robo-advisors are algorithms that can develop automated portfolio allocations and provide investment proposals with little or no human intervention based on pre-defined parameters based on customers' investment goals
Answers here:
Questions:
907.1. The paper On the Fintech Revolution (by Gomber, Kauffman, Parker, and Weber) contain several fintech or fintech-related concepts and definitions, including the following five concept pairs:
I. Delayed net settlement (DNS) accumulates payments that can be netted against one another before irrevocable funds are made available; DNS minimizes the need for additional liquidity but also makes the delay of funds availability likely at times. In contrast, the real-time gross payment systems (RTGS) approach supports the irrevocable availability of funds immediately, but requires the need for central bank involvement to inject intraday liquidity.
II. Blockchain is a distributed ledger technology that is closely associated with digital ledger technology (DLT) which is the use of decentralized digital trust verification through encrypted digital signatures
III. Initial coin offerings (ICOs) enable investors to acquire ownership of cybercurrency tokens in a start-up venture which permits the entrepreneurs to bypass the typical reporting, due diligence and regulations associated with initial public offerings (IPOs). Smart contracts are self-executing contracts whose terms are written in code and stored on a blockchain network.
IV. Centripetal forces lead to agglomeration (market linkages, local knowledge externalities, thick labor markets, and national regulations) but centrifugal forces lead to globalization of the industry with punctuated equilibria of local innovations that are spun off for increasingly international R&D-driven service transformation
V. Know your customer (KYC) compliance requires financial institutions to verify the identity of their clients. All banks in the U.S. must demonstrate KYC procedures, develop customer identification programs (CIP), and implement detailed transaction monitoring; the purpose is to avoid bank involvement, however unintentional, in criminal money laundering activities
Which of the above definitions is (are) correct?
a. None of the definitions are correct
b. Only I., III., and V. are correct; i.e., II. and IV. are inaccurate
c. Only II. and IV. are correct; i.e., I., III. and V. are inaccurate
d. All five definitions are correctly specified
907.2. In regard to risk management, blockchain and regulatory considerations in markets, each of the following statements is TRUE except which is inaccurate (according to Gomber et al)?
a. The biggest pain points for investment firms includes regulatory compliance and dealing with legacy systems
b. Blockchain is a potential game-changer but, with respect to clearing and trading, multiple technical and non-technical implementation hurdles remain unsolved
c. The most productive and successful recent academic research has been (i) the identification of causes of flash crashes and (ii) developing methods to manage cyber risk during extreme market events
d. With respect to regulators, in the last decade numerous new regulations have generated massive amounts of data, but regulators often cannot adequately process and analyze these massive amounts of data
907.3. With respect to the changing landscape of investments in the fintech world, each of the following statements is true EXCEPT which is inaccurate (according to Gomber et al)?
a. High automation finance will utilize big data to generate innovative user experiences including just-in-time financial literacy and personal digital financial twins
b. Robo-advisors replace financial advisors by unwinding fallacies inherent to modern portfolio theory (MPT) and by addressing the personal aspects of financial investments such as tax and insurance
c. A social trading platform is a combination of a social network and a trading platform that offers its users the possibility to share their investment ideas and/or copy the ideas/trades other users
d. Robo-advisors are algorithms that can develop automated portfolio allocations and provide investment proposals with little or no human intervention based on pre-defined parameters based on customers' investment goals
Answers here:
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