米貨幣銀行學(xué)課件

1、Chapter 2An Overview of the Financial System2Function of Financial MarketsAllows transfers of funds from person or business without investment opportunities to one who has them2.Improves economic efficiency3Classifications of Financial Markets1.Debt MarketsShort-term (maturity 1 year) Capital Market

2、2.Equity MarketsCommon stocks1.Primary MarketNew security issues sold to initial buyers2.Secondary MarketSecurities previously issued are bought and sold1.ExchangesTrades conducted in central locations (e.g., New York Stock Exchange)2.Over-the-Counter MarketsDealers at different locations buy and se

3、ll4Internationalization of Financial MarketsInternational Bond Market1. Foreign bonds2. EurobondsNow larger than U.S. corporate bond marketWorld Stock MarketsU.S. stock markets are no longer always the largest: Japan sometimes larger5Function of Financial IntermediariesFinancial Intermediaries1.Enga

4、ge in process of indirect finance2.More important source of finance than securities markets3.Needed because of transactions costs and asymmetric informationTransactions Costs1.Financial intermediaries make profits by reducing transactions costs2.Reduce transactions costs by developing expertise and

5、taking advantage of economies of scale6Function of Financial IntermediariesRisk Sharing1.Create and sell assets with low risk characteristics and then use the funds to buy assets with more risk (also called asset transformation).2.Also lower risk by helping people to diversify portfolios7Asymmetric

6、Information: Adverse Selection, and Moral HazardAdverse Selection1.Before transaction occurs2.Potential borrowers most likely to produce adverse es are ones most likely to seek loans and be selectedMoral Hazard1.After transaction occurs2.Hazard that borrower has incentives to engage in undesirable (

7、immoral) activities making it more likely that wont pay loan backFinancial intermediaries reduce adverse selection and moral hazard problems, enabling them to make profits8Information Asymmetries and Information Costsasymmetric informationissuers of financial instruments(borrowers who want to issue

8、bonds and firms that want to issue stock) know much more about their business prospects and their willingness to work than potential lenders or investors9Information Asymmetries and Information CostsAdverse Selectionpotential borrowers know more about the projects they wish to finance than prospecti

9、ve lenders 10Information Asymmetries and Information CostsIf you cant tell the difference between the two firms prospects, you will be willing to pay a price based only on the firms average quality. The result is that the stock of the good company will be undervalued. Since the managers know their s

10、tock is worth more than the average price, they wont issue the stock in the first place. That leaves only the firm with bad prospects in the market. 11Information Asymmetries and Information CostsSolving the Adverse Selection Problem1.Disclosure of Information2.Collateral and Net Worth12Information

11、Asymmetries and Information CostsMoral HazardMoral hazard arises when we cannot observe peoples actions, and so cannot judge whether a poor e was intentional or just a result of bad luck principal-agent problem The separation of ownership from control.When the managers of a company are the owners, t

12、he problem of moral hazard in equity financing disappears. 13Information Asymmetries and Information CostsMoral Hazard in Debt FinanceBecause debt contracts allow owners to keep all the profits in excess of the loan payments, they encourage risk taking a good legal contract can solve the moral hazar

13、d problem that is inherent in debt finance. Bonds and loans often carry restrictive covenants 14Financial Intermediaries15Size of Financial Intermediaries16Regulatory Agencies17Regulatory Agencies18Regulation of Financial MarketsTwo Main Reasons for Regulation1.Increase information to investorsA.Decreases adverse selection and moral hazard problemsB.SEC forces corporations to disclos