Chapter 1-Financial Markets
Chapter 1-Financial Markets
Chapter 1-Financial Markets
CHAPTER 1: INTODUCTION
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LEARNING GOALS
Differentiate between primary and secondary
markets.
Differentiate between money and capital
markets.
Understand what foreign exchange markets are.
Direct Finance
ex: stock, bonds or foreign
exchange.
Indirect Finance
PRIMARY
MARKETS
SECONDARY
MARKETS
markets in which
users of funds
e.g., corporations and
VS markets in which financial
instruments already in
governments existence are traded
raise funds by issuing
among lenders
financial instruments
e.g., stocks and bonds
MONEY
MARKETS
Spot FX
the immediate exchange of currencies at current
exchange rates
Forward FX
the exchange of currencies in the future on a
specific date and at a pre-specified exchange
rate
Derivative
Security Markets
a financial security whose
payoff is linked to (i.e.,
“derived” from) another
security or commodity
generally an agreement to
exchange a standard quantity of
assets at a set price on a specific
date in the future
Financial Market Regulation
The Securities Act of
1933
full and fair disclosure and
securities registration
The Securities
Exchange Act of 1934
Securities and Exchange
Commission (SEC) is the
main regulator of securities
markets
Financial
Institutions (FIs)
institutions through which Types of
suppliers channel money to Financial
users of funds Institutions
• Commercial Banks
Financial Institutions • Thrifts
are distinguished by • Insurance companies
whether they accept • Securities firms and investment bank
deposits • Finance companies
• Mutual Funds
• Hedge Funds
• Pension Funds
Unique Economic Functions Performed by FIs
Monitoring Costs
Provide denomination
intermediation