Transcript Financial Markets and Institutions

Financial Markets
and Institutions
Power Point Lecture Notes
By
Joseph F. Greco, Ph.D.
College of Business and Economics
California State University, Fullerton
[email protected]
1
CHAPTER 1
The Role of Financial
Markets and Institutions
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CHAPTER 1 OVERVIEW
This Chapter will:
A. describe the 3 types of financial markets that
accommodate various transactions,
B. introduce the concept of security valuation
within financial markets,
C. describe the role of financial institutions
within financial markets,
D. identify the types of financial institutions that
facilitate transactions in financial markets.
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A. Overview of Financial Markets
1. Three Types of Financial Markets
a. Money versus Capital Markets
b. Primary versus Secondary Markets
c. Organized versus Over-the-Counter
Markets
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A.Overview of Financial Markets
2. Securities Traded in Financial Markets
a. Money Market Securities
b. Capital Market Securities
1)
2)
Bonds and Mortgages
Stocks
c. Derivative Securities
1)
2)
Speculation using an underlying asset
Acts as Risk Management – a form of hedging
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B. Valuation of Securities in
Financial Markets
1. Market Pricing of Securities Impacted by
a. Information on Valuations (top-down
approach)
• Economic
• Industry
• Firm-specific
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B. Valuation of Securities in
Financial Markets
2. Market Pricing of Securities Impacted by
a. Impact of Valuations on Pricing
• Information affects the supply and
demand for a security
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B. Valuation of Securities in
Financial Markets
3. Market Pricing of Securities Impacted by
a. Impact of the Internet on the Valuation
Process
•More timely pricing
•More accurate pricing
•More informative pricing
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B. Valuation of Securities in
Financial Markets
4. Market Efficiency
When security prices fully reflect all available
information, the market is said to be efficient.
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B. Valuation of Securities in
Financial Markets
5. Financial Market Regulation
a. Disclosure
b. Regulatory Response to Financial
Scandals
c. Other Regulations
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C. Role of Financial Institutions in
Financial Markets
Global Financial Markets
1. How Financial Markets Influence Economic
Development
2. Global Integration
a. Barriers to Global Integration
b. Financial Market Integration within Europe
3. Role of the Foreign Exchange Market
a. Foreign Exchange Rates
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D. Types of Financial Institutions in
Financial Markets
1. Role of Depository Institutions
a. Commercial Banks
b. Savings Institutions
c. Credit Unions
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D. Types of Financial Institutions in
Financial Markets
2. Role of Nondepository Financial Institutions
•
•
•
•
•
Finance Companies
Mutual Funds
Securities Firms
Insurance Companies
Pension Funds
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D. Types of Financial Institutions in
Financial Markets
3. Comparison of Roles among Financial
Institutions
a. Role as a Monitor of Publicity Traded Firms
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D. Types of Financial Institutions in
Financial Markets
OVERVIEW OF FINANCIAL INSTITUTIONS
1. Competition between Financial Institutions
a.
Impact of the Internet on Competition
2. Consolidation of Financial Institutions
a.
b.
Impact of Consolidation on Valuation
Typical Structure of a Financial Conglomerate
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