FIN6901 Ch2 - Financial Markets and Institutions
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What are some financing decisions?
- Source of funds (capital)
- Capital structure
Which market is bigger than the stock market?
What is the financial market?
Market where securities are issued and traded
What is the primary market?
Market for the sale of new securities by corporations. (Stocks issued to big institutions like Goldman Sachs)
What is the secondary market?
Market in which previously issued securities are traded among investors
What is an IPO?
- Initial public offering
- First offering of stock to the general public
What is the fixed-income market?
Market for debt securities
Capital markets are used for what?
What are bonds?
Example of long-term debt
What are money markets used for?
What is an example of short-term debt?
- Commercial paper
- Used by financial companies
What are some alternative financial markets?
- Foreign exchange
- Commodities markets
- Financial derivatives markets
What is a mutual fund?
An investment company that pools the savings of many investors and invests in a portfolio of securities.
What is a hedge fund?
A private investment pool, open to wealthy or institutional investors, that is only lightly regulated and therefore can pursue more speculative policies than mutual funds
What is a pension fund?
A fund set up by an employer to provide for employees' retirement
What are examples of financial institutions?
- Commercial bank
- Investment bank
- Insurance company
In financial transactions, who are the intermediaries?
- Insurance companies
- Brokerages firms
In financial transactions, who are the investors?
What are the functions of financial markets and intermediaries?
- Transport cash across time
- Risk transfer and diversification
- Provide payment mechanism
- Provide financial information
What are some of the causes of the financial crisis of 2007-2009?
- Falling housing prices
- Credit freeze
- International effect
Did the government bailout response (TARP) effectively decrease the uncertainty in the market?
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