02_Overview of the Financial Systemppt

FINANCIALMARKETSANDINSTITUTIONS姚瑾TianfuCollegeofSWUFEFall,2010CH02_OverviewoftheFinancialSystemOutline•FunctionofFinancialMarkets•StructureofFinancialMarkets•InternationalizationofFinancialMarkets•FunctionofFinancialIntermediaries•FinancialIntermediaries•RegulationoftheFinancialSystemAssignmentreview•Assignment01Newsreport•Lex专栏：亚洲不妨多发债2-5FunctionofFinancialMarkets•Channelsfundsfrompersonorbusinesswithoutinvestmentopportunities(i.e.,“Lender-Savers”)toonewhohasthem(i.e.,“Borrower-Spenders”)•Improveseconomicefficiency2-6ChapterPreviewWhyitsimportanttotheeconomy?•Promotingeconomyefficiency–$0$200•Improvethewell-beingofconsumers–Youngtoenjoy2-8FinancialMarketsFundsTransfereesLender-Savers1.Households2.Businessfirms3.Government4.ForeignersBorrower-Spenders1.Businessfirms2.Government3.Households4.Foreigners2-9SegmentsofFinancialMarkets1.DirectFinance•Borrowersborrowdirectlyfromlendersinfinancialmarketsbysellingfinancialinstrumentswhichareclaimsontheborrower’sfutureincomeorassets2.IndirectFinance•Borrowersborrowindirectlyfromlendersviafinancialintermediaries(establishedtosourcebothloanablefundsandloanopportunities)byissuingfinancialinstrumentswhichareclaimsontheborrower’sfutureincomeorassets2-10FunctionofFinancialMarketsCopyright©2009PearsonPrenticeHall.Allrightsreserved.2-11StructureofFinancialMarketsIthelpstodefinefinancialmarketsalongavarietyofdimensions(notnecessarilymutuallyexclusive).Forstarters,…Copyright©2009PearsonPrenticeHall.Allrightsreserved.2-12StructureofFinancialMarkets1.DebtMarkets–Short-Term(maturity1year)–Long-Term(maturity10year)–Intermediateterm(maturityin-between)–Represented$41trillionattheendof2007.2.EquityMarkets–Paydividends,intheoryforever–Representsanownershipclaiminthefirm–TotalvalueofallU.S.equitywas$18trillionattheendof2005.Copyright©2009PearsonPrenticeHall.Allrightsreserved.2-13StructureofFinancialMarkets1.PrimaryMarket–Newsecurityissuessoldtoinitialbuyers–Typicallyinvolvesaninvestmentbankwhounderwritestheoffering2.SecondaryMarket上海证券交易所–Securitiespreviouslyissuedareboughtandsold–ExamplesincludetheNYSEandNasdaq–Involvesbothbrokersanddealers(doyouknowthedifference?)Copyright©2009PearsonPrenticeHall.Allrightsreserved.2-14StructureofFinancialMarketsfromthesecondarymarket,itservestwoimportantfunctions:•Provideliquidity,makingiteasytobuyandsellthesecuritiesofthecompanies•EstablishapriceforthesecuritiesCopyright©2009PearsonPrenticeHall.Allrightsreserved.2-15StructureofFinancialMarketsWecanfurtherclassifysecondarymarketsasfollows:1.Exchanges–Tradesconductedincentrallocations(e.g.,NewYorkStockExchange,CBT)2.Over-the-CounterMarkets–Dealersatdifferentlocationsbuyandsell–BestexampleisthemarketforTreasurysecuritiesNYSEhomepage©2009PearsonPrenticeHall.Allrightsreserved.2-16ClassificationsofFinancialMarketsWecanalsofurtherclassifymarketsbythematurityofthesecurities:1.MoneyMarket:Short-Term(maturity1year)2.CapitalMarket:Long-Term(maturity1year)plusequitiesCopyright©2009PearsonPrenticeHall.Allrightsreserved.2-17InternationalizationofFinancialMarketsTheinternationalizationofmarketsisanimportanttrend.TheU.S.nolongerdominatestheworldstage.•InternationalBondMarket–Foreignbonds•Denominatedinaforeigncurrency•Targetedataforeignmarket–Eurobonds•Denominatedinonecurrency,butsoldinadifferentmarket•nowlargerthanU.S.corporatebondmarket)•Over80%ofnewbondsareEurobonds.Copyright©2009PearsonPrenticeHall.Allrightsreserved.2-18InternationalizationofFinancialMarkets•EurocurrencyMarket–Foreigncurrencydepositedoutsideofhomecountry–EurodollarsareU.S.dollarsdeposited,say,London.–GivesU.S.borrowsanalternativesourcefordollars.•WorldStockMarkets–U.S.stockmarketsarenolongeralwaysthelargest—atonepoint,Japan'swaslargerCopyright©2009PearsonPrenticeHall.Allrightsreserved.2-19InternationalizationofFinancialMarketsAsthenextslideshows,thenumberofinternationalstockmarketindexesisquitelarge.Formanyofus,theleveloftheDowortheS&P500isknown.HowabouttheNikkei225?OrtheFTSE100?Doyouknowwhatcountriestheserepresent?InternationalizationofFinancialMarketsFunctionofFinancialIntermediaries:IndirectFinanceCopyright©2009PearsonPrenticeHall.Allrightsreserved.2-22FunctionofFinancialIntermediaries:IndirectFinanceInsteadofsaverslending/investingdirectlywithborrowers,afinancialintermediary(suchasabank)playsasthemiddleman:•theintermediaryobtainsfundsfromsavers•theintermediarythenmakesloans/investmentswithborrowersCopyright©2009PearsonPrenticeHall.Allrightsreserved.2-23Sourceoffinancing•Thisprocess,calledfinancialintermediation,isactuallytheprimarymeansofmovingfundsfromlenderstoborrowers.•Moreimportantsourceoffinancethansecuritiesmarkets(suchasstocks)•BOX1Copyright©2009PearsonPrenticeHall.Allrightsreserved.2-24GlobalPerspective•StudiesshowthatfirmsintheU.S.,Canada,theU.K.,andotherdevelopednationsusuallyobtainfundsfromfinancialintermediaries,notdirectlyfromcapitalmarkets.•InGermanyandJapan,financingfromfinancialintermediariesexceedscapitalmarketfinancing10-fold.•However,therelativeuseofbondsversusequitydoesdifferbycountry.Why