货币银行学双语复习提纲

Chapter 1

Financial markets

Markets in which funds are transferred from people who have an excess of available funds to people who have a shortage.

Security

Is a claim on the issuer’s future income or assets.

Bond

Is a debt security that promises to make payments periodically for a specified period of time.

Interest rate

Is the cost of borrowing or the price paid for the rental of funds.

Common stock (stock)

Represents a share of ownership in a corporation. ? To raise funds to finance their activities.

? A higher price for a firm’s shares means that it can raise a larger amount of funds, which can

be used to buy production facilities and equipment.

The foreign exchange market

For funds to be transferred from one country to another, they have to be converted from the currency in the country of origin(say, dollars) into the currency of the country they are going to (say, euros). The foreign exchange market is where this conversion takes place.

The foreign exchange rate

The price of one country’s currency in terms of another’s.

Financial intermediaries

Institutions that borrow funds from people who have saved and in turn make loans to others.

Banks

Are financial institutions that accept deposits and make loans. ? Commercial banks

? Saving and loan associations ? Mutual saving banks ? Credit unions

Other financial institutions ? Insurance companies ? Finance companies ? Pension funds ? Mutual funds

? Investment banks

Types of financial intermediaries

? Depository institutions存款机构

Commercial banks

Savings and loan associations and mutual savings banks Credit unions信用社

? Contractual savings institutions契约型储蓄机构

Life insurance companies人寿保险

Fire and casualty insurance companies意外伤害险

Pension funds and government retirement funds养老和政府退休资金 ? Investment intermediaries投资中介

Finance companies Mutual funds

Money market mutual funds Investment banks

A budget deficit is the excess of government expenditures over tax revenues for a particular time period, typically a year, while a budget surplus arises when tax revenues exceed government expenditures.

Chapter 2

Financial markets perform the essential economic function of channeling funds from households, firms, and governments that have saved surplus funds by spending less than their income to those that have a shortage of funds because they wish to spend more than their income.

Direct finance

Borrowers borrow funds directly from lenders in financial markets by selling them securities, which are claims on the borrower’s future income or assets. ? Advantages

? Borrower can communicate with investor ? Finance cost is lower as no middleman ? Disadvantages

? Professional skill & knowledge (surplus units) ? High risk (surplus units) ? Threshold is high (deficit units)

Securities

Are assets for the person who buys them but liabilities for the individual or firm that sells them.

The process of indirect finance using financial intermediaries, called financial intermediation, is the primary route for moving funds from lenders to borrowers.

Indirect finance

The process of indirect finance using financial intermediaries, called financial intermediation, is the primary route for moving funds from lenders to borrowers. ? Advantages

? Transaction costs

The time and money spent in carrying out financial transactions, are a major problem for people who have excess funds to lend.

Financial intermediaries can substantially reduce transaction costs because they have developed expertise in lowering them; and because their large size allows them to take advantage of economies of scale. ? Risk sharing Risk sharing

They create and sell assets with risk characteristics that people are comfortable with, and the intermediaries then use the funds they acquire by selling these assets to purchase other assets that may have far more risk.

Low transaction costs allow financial intermediaries to share risk at low cost, enabling them to earn a profit on the spread between the returns they earn on risky assets and the payments they make on the assets they have sold. This process sometimes referred to as asset transformation, because in a sense, risky assets are turned into safer assets for investors.

Diversification entails investing in a collection(portfolio) of assets whose returns do not always move together, with the result that overall risk is lower than for individual assets. ? Disadvantages

? Asymmetric information: adverse selection and moral hazard Asymmetric information

In financial markets, one party often does not know enough about the other party to make accurate decisions.

Adverse selection is the problem created by asymmetric information before the transaction occurs.

Moral hazard is the problem created by asymmetric information after the transaction occurs.

Structure of financial markets

? Debt and equity markets债务市场和债权市场 ? Returns to buyers

Debt: The borrower to pay the holder of the instrument fixed dollar amounts at regular intervals (interest and principal payments) until a specified date (the maturity date), when a final payment is made.

Equities: Equities often make periodic payments (dividends) to their holders and are considered long-term securities because they have no maturity date. ? Decision making

Equities: Owning stock means that you own a portion of the firm and thus have the right to vote on issues important to the firm and to elect its directors. ? Claimant

Equities: The corporation must pay all its debt holders before it pays its equity holders. ? Benefit

Equities: Equity holders benefit directly from any increases in the corporation’s profitability or asset value because equities confer ownership rights on the equity holders.

Debt: Debt holders do not share in this benefit, because their dollar payments is fixed. ? Primary and secondary markets一级市场和二级市场

? A primary market is a financial market in which new issues of a security.

? A secondary market is a financial market in which securities that have been previously issued

can be resold.

? Exchanges and over-the-counter markets场内交易市场和场外交易市场

? Exchanges, where buyers and sellers of securities meet in one central location to conduct

trades.

? OCT market, in which dealers at different locations who have an inventory of securities stand

ready to buy and sell securities ”over the counter” to anyone who comes to them and is willing to accept their prices.

? Money and capital markets货币市场和资产市场

? The money market is a financial market in which only short-term debt instruments are traded. ? The capital markets is the market in which longer-term debt and equity instruments are

traded.

Chapter 3

Money

As anything that is generally accepted in payment for goods or services or in the repayment of debts.

Currency vs. money

Money =currency+ deposits.

Income is a flow of earnings per unit of time.

Functions of money

? Medium of exchange

It is used to pay for goods and services.

The use of money as a medium of exchange promotes economic efficiently by minimizing the time spent in exchanging goods and services.

The time spent trying to exchange goods or services is called transaction cost. In a barter economy, transaction costs are high because people have to satisfy a “double coincidence of wants”.

For a commodity to function effectively as money, it has to meet several criteria:(1)it must be easily standardized, making it simple to ascertain its value;(2)it must be widely accepted;(3)it must be divisible, so that it is easy to “make change”;(4)it must be easy to carry; and (5)it must not deteriorate quickly. ? Unit of account

It is used to measure value in the economy. We measure the value of goods and services in terms of money.

Using money as a unit of account reduces transaction costs. ? Store of value

It is a repository of purchasing power over time.

Liquidity

The relative ease and speed with which an asset can be converted into a medium of exchange.

Money is the most liquid asset of all because it is the medium of exchange; it does not have to be converted into anything else to make purchases.

Evolution of the payments system ? Commodity money实物货币

Money made up of precious metals or another valuable commodity.

The problem with a payments system based exclusively on precious metals is that such a form of money is very heavy and is hard to transport one place to another. ? Fiat money不兑现货币

Paper currency decreed by governments as legal tender but not convertible in to coins or precious metal. ? Checks支票

Is an instruction from you to your bank to transfer money from your account to someone else’s account when she deposits the check. ? Advantages

No currency need be moved. Reduces the transportation costs. Improves economic efficiency.

Can be written for any amount up to the balance in the account. ? Disadvantages

Takes time to get checks from one place to another.

Takes several business days before a bank will allow you to make use of the funds

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