金融机构与金融市场第二章

Equity Markets

Common Stock
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2.2.2 Characteristics of Debt Markets Instruments

Debt instruments

Buyers of debt instruments are suppliers (of capital) to the firm, not owners of the firm

Foreign bonds Eurobonds (now larger than U.S. corporate bond market)

World Stock Markets

U.S. stock markets are no longer always the largest—at one point, Japan's was larger
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2.2.7 Classifications of Financial Markets
3.
Exchanges

Trades conducted in central locations (e.g., New York Stock Exchange)
4.
Over-the-Counter Markets
Improves economic efficiency

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2.1.1 Function of Financial Markets
Figure 2.1 Flow of Funds Through the Financial System
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2.1.2Financial Markets Funds Transferees
Common stock has no finite life or maturity date
Advantage of common stock is potential high income since return is not fixed or limited

Disadvantage is that debt payments must be made before equity payments can be made
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2.2.1 Classifications of Financial Markets
1.
Debt Markets

Short-Term (maturity < 1 year) Money Market Long-Term (maturity > 1 year) Capital Market
2.
1.
Direct Finance
•
Borrowers borrow directly from lenders in financial markets by selling financial instruments which are claims on the borrower’s future income or assets
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2.1.4 Importance of Financial Markets


Financial markets are critical for producing anHale Waihona Puke Baiduefficient allocation of capital, which contributes to higher production and efficiency for the overall economy, as well as economic security for the citizenry as a whole Financial markets also improve the lot (命运) of individual participants by providing investment returns to lender-savers, facilities to borrowersspenders.

Dealers at different locations buy and sell
NYSE home page http://www.nyse.com
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2.3 Internationalization of Financial Markets

International Bond Market
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2.1 Function of Financial Markets

Allows transfers of funds from person or business without investment opportunities (i.e., “Lender-Savers”) to one who has them (i.e., “Borrower-Spenders”)
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2.2.3 Characteristics of Equity Markets Instruments

Equity instruments (common stock is most prevalent equity instrument)

Buyers of common stock are owners of the firm

Debt instruments have a finite life or maturity date
Advantage is that the debt instrument is a contractual promise to pay with legal rights to enforce repayment Disadvantage is that return/profit is fixed or limited

Function of Financial Markets Structure of Financial Markets Internationalization of Financial Markets Function of Financial Intermediaries Financial Intermediaries Regulation of the Financial System
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2.2.6 Classifications of Financial Markets
1.
Primary Market

New security issues sold to initial buyers
2.
Secondary Market

Securities previously issued are bought and sold
Chapter Two:
Overview of the Financial System
Chapter 2
Overview of the Financial System
Chapter Preview

We examine the role of the financial system in an advanced economy. We study the effects of financial markets and institutions on the economy, and look at their general structure and operations. Topics include:
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2.4 Function of Financial Intermediaries (FIs)

Financial Intermediaries
1. 2.
Engage in process of indirect finance More important source of finance than securities markets Needed because of transactions costs and asymmetric information
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2.2.4 Characteristics of Financial Markets
1.

Debt Markets
Although less well-known by the average person, debt markets in U.S. are much larger in total dollars than equity markets, due to greater number of participant classes (households, businesses, government, and foreigners) and size of individual participants (businesses, and government)
1.
Banks provide depositors with checking accounts (current account 往来帐户) that enable them to pay their bills easily
Depositors can earn interest on checking and savings accounts and yet still convert them into goods and services whenever necessary
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2.4.2 Function of Financial Intermediaries
•
A financial intermediary’s low transaction costs mean that it can provide its customers with liquidity services, services that make it easier for customers to conduct transactions
2.
Indirect Finance
•
Borrowers borrow indirectly from lenders via financial intermediaries (established to source both loanable funds and loan opportunities) by issuing financial instruments which are claims on the borrower’s future income or assets

Lender-Savers Households Business firms Government Foreigners

Borrower-Spenders Business firms Government Households Foreigners
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2.1.3 Segments of Financial Markets
3.
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2.4.1 Function of Financial Intermediaries

Transactions Costs
1.
Financial intermediaries make profits by reducing transactions costs
2.
Reduce transactions costs by developing expertise and taking advantage of economies of scale
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2.2.5 Characteristics of Financial Markets
2.

Equity Markets
Although U.S. markets are highly efficient, the world’s largest, and more familiar to the average person, they are far smaller than the U.S. debt markets largely due to the fact that the only applicable participants are businesses