Midterm _1 Outline

Midterm _1 Outline - Chapter 3 Expectations for Midterm 1...

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Chapter 3 Expectations for Midterm 1 Chapter Outline I. Financial Instruments (what I want you to know) I expect you to know how to define a financial instrument, to know the uses of financial instruments, to know their characteristics (standardization and information), to know the difference between an underlying and derivative instrument, and some of the basic instruments: 1. Bank loans 2. Bonds 3. Home mortgages 4. Stocks 5. Asset-backed Securities 6. Insurance contracts 7. Futures contracts 8. Options II. Financial Markets I expect you to know the roles of financial markets, their structure (primary versus secondary, centralized exchange versus OTM market versus and ECN, and the difference between debt and equity markets). Also, I expect you to know how we can determine if a market is functioning properly. III. Financial Institutions (roles that they play in well-functioning financial markets) Financial institutions are the firms that provide access to the financial markets; they sit between savers and borrowers and so are known as financial intermediaries. Examples include banks, insurance companies, securities firms and pension funds. a. The Role of Financial Institutions b. The Structure of the Financial Industry 1. Financial institutions or intermediaries can be divided into a couple of broad categories called depository and nondepository institutions. 2. Depository institutions 3. Nondepository institutions a. Insurance companies b. Pension funds c. Securities firms d. Finance Companies e. Government Sponsored Enterprises We used this chapter to study the recent financial crisis. Make sure you understand the various participants in the crisis, what role the played in financial markets, and how their behavior either added to or acted against the crisis. To understand this discussion you need to have a good understanding of instruments (securities), markets, and institutions.
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Chapter 1 Expectations for Midterm 1 Chapter Outline I. The Five Parts of the Financial System (understand what they are and how they have changed, if at all, over time) a. Money b. Financial instruments. c. Financial markets d. Financial institutions e. Government regulatory f. Central banks. II. The Five Core Principles of Money and Banking a. Time has value (think of how this creates a need for markets and how this influences the value of securities) b. Risk requires compensation (willingness for some entity to pay to offload risk and what the investor on the other side requires for bearing that risk) c. Information is the basis for decisions (how important is the performance of financial markets dependent on good information and how, if at all, did poor information lead to the recent financial crisis) d. Markets determine prices and allocate resources. e. Stability improves welfare.
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This note was uploaded on 11/22/2011 for the course ECONOMIC ManEc352 taught by Professor Keithvorkink during the Winter '11 term at BYU.

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Midterm _1 Outline - Chapter 3 Expectations for Midterm 1...

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