FinancialMarketsChap2 - Ch. 2 1. Arbitrage, 22-...

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Ch. 2 1. Arbitrage, 22 - circumventing regulations and finding loopholes in (tax) regulations. Also, taking advantage of price differences of an asset in different markets to make a profit. 2. Asset/Liability management, 18- term for a financial institution’s efforts to manage its assets relative to the nature of its liabilities. 3. Asset securitization, 23- The process by which a financial institution pools loans and sells securities backed by those loans. 4. Certificate of Deposit (CD), 20 – Type III Liability. Maturity is known, but outlay is unknown, fluctuates with interest rates. (3 year but adjusts every 3 months for example). 5. Commercial Bank, 16- accept deposits and use proceeds to lend funds to consumers and businesses. The bank makes a direct investment in the borrower, the depositor makes an indirect investment in the borrower, since it is the depositor’s money that is loaned to a borrower. 6. Contracting cost, 17- The cost of writing loan contracts. Also includes the costs of enforcing the loan agreement. 7. Debit card, 18- when used, the funds are immediately withdrawn form the purchaser’s accounts. 8. Denomination, 25- monetary amount of investment. Denomination intermediation – transforming very large assets into quite divisible ones. 9. Depository Institutions , 15- a type of financial intermediaries that includes commercial banks, savings and loans institutions, savings banks, and credit unions, which acquire the bulk of their funds by offering liabilities to the public mostly in the form of deposits. 10. Direct Investments, 16- Investments made by financial intermediaries such as loans and/or securities. 11.
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FinancialMarketsChap2 - Ch. 2 1. Arbitrage, 22-...

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