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BUS 206- Financial Markets and Institutions Chap. 1 Notes

by: Wolf Civil

BUS 206- Financial Markets and Institutions Chap. 1 Notes BUS 206

Marketplace > La Salle University > BUS 206 > BUS 206 Financial Markets and Institutions Chap 1 Notes
Wolf Civil
La Salle

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About this Document

These notes give a brief overview of what we spoke about in Chapter 1.
Financial Mkts & Insts
Evgeny Radetskiy
Class Notes
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This 3 page Class Notes was uploaded by Wolf Civil on Wednesday January 20, 2016. The Class Notes belongs to BUS 206 at La Salle University taught by Evgeny Radetskiy in Summer 2015. Since its upload, it has received 23 views.

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Date Created: 01/20/16
The Role of Financial Markets and Institutions Chap 1 Study Guide By: Wolf Civil What are the roles of financial markets? Financial Markets transfer funds from those  who have excess funds to those who need funds. Surplus Units: Investors or participants who receive more money then they spend.  Deficit Units: Borrowers or people who spend more money than they receive. Debt Securities: Debt (also called credit, or borrowed funds) incurred by the issuer. Equity Securities: (Also called stocks) represent ownership in the firm. Primary and Secondary Markets Primary Markets: Facilitate the issuance of new securities; selling new security issues  for the first time. Secondary Markets: Facilitate the trading of existing securities; change in the  ownership of the securities.  Liquidity: The degree to which securities can easily be liquidated (sold) without a oss of  value. Securities Traded in Financial Markets Money Market Securities: Short­Term debt securities  Have a maturity of one year or less Capital Market Securities: Long­Term securities  Bonds, stocks, mortgages, mortgage­backed securities Derivative Securities: Values are derived from the values of underlying assets  Options, futures, swaps Securities Regulations: The less regulation the better. Happens after the bad things  happen. Have high costs.  Role of financial Institutions  Depository Institutions: Accept deposits from Surplus Units and provide credit to  Deficit Units through loans and purchases of securities.  Commercial Banks  Savings Institutions­ Thrifts, include savings and loans & savings banks  Credit Unions: Non Profit Organizations, restrict business to Credit Union  members with a common bond.  Federal Funds Market: Facilitates the low of funds between depository institutions.  Non­ Depository Institutions  Finance Companies: Obtain funds by issuing securities and lend funds to  individuals and small businesses.   Mutual Funds: Sell shares to Surplus Units and use the funds received to  purchase. Systemic Risk: Spread of financial problems, among financial problems, among  financial institutions and markets, that could cause a collapse in the system.  Federal Reserve Actions: Fed provided emergency loans to many security firms that  were not subject to its regulation.  Emergency Economic Stabilization Act: October 2008 (aka Bailout)   To resolve the liquidity problems of financial institutions and to restore the  confidence of the investors. 


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