Lecture 1 Continued Flashcards
what are the recent financial & economic developments?
- price bubble for tech stocks burst in 2000
- 2001 recession exacerbated by terrorist attack
- housing price bubble burst resulting in housing price declines
- 2007-08 financial crisis followed by the 2008-09 great recession
- economic recovery from the 2007-09 disaster has been slow and economic growth remains low
what are the 4 major components of the US Financial system?
policy makers
monetary system
financial institutions
financial markets
who are policy makers?
they pass laws and set fiscal/monetary policies
president, congress, US Treasury, federal reserve board
what is the monetary system?
they create & transfer money
federal reserve, central bank, commercial banking system
what are financial institutions
they accumulate and lend/invest savings
they are depository institutions, contractual savings organisations, securities firms, finance firms
what are financial markets?
they market & facilitate the transfer of financial assets
they are debt securities markets, equity securities markets, derivative securities markets and foreign exchange markets
what are the 3 components of financial system & the financial functions?
monetary system (creating & transferring money)
financial institutions (accumulating and lending/investing savings)
financial markets (marketing & transferring financial assets)
what are debt securities
a negotiable/tradable liability or loan
involves debt rather than ownership
e.g., bonds, mortgage-backed securities
what are the types of financial markets?
money markets
capital markets
primary & secondary markets
debt securities markets
derivative securities markets
equity securities markets
foreign exchange markets
what are money markets?
where debt securities with maturities of one year or less are issued/traded
what are capital markets?
where debt securities with maturities longer than one year and corporate stocks are issued/traded
what is maturity?
the date on which the validity of a financial instrument ends
what are primary/secondary markets?
primary - where the initial offering or origination of debt securities take place
secondary - physical/electronic platforms where debt and equity securities are traded
what is the debt securities markets?
where money market securities, bonds and mortgages are traded
what is the equity securities markets?
where corporate ownership shares are sold/traded
