Respond to the following questions thoroughly, in 150-300 words for each question. Use your textbook as your first and major reference.
- What is the function of an investment bank? How does it differ from a commercial bank? How is an investment bank regulated?
- Describe the practice of hedging. How might a financial institution hedge against the future changes in market conditions? What is the difference between a long and a short position and how do these positions deal with risk?