Class 4 Ch 3 Lecture Outline

Class 4 Ch 3 Lecture Outline - Class 4; Chapter 3 Financial...

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Class 4; Chapter 3 Financial Instruments, Financial Markets, and Financial Institutions Topic Overview Chapter 3 surveys the financial system in three steps: 1) financial instruments or securities; 2) financial markets and 3) financial institutions. Summary Point Finance system solves three problems: 1) Liquidity: spending flow does not coincide with earning flow so buffer stocks are required. 2) Risk (regulator) individuals face uncertainty of future realizations they likely cannot survive. 3) Information (regulator) The worth of things is unknown and money mediated exchange reveals worth as value which directs economic activity. The importance of these ideas were captured in the following Frontline Video http://www.pbs.org/wgbh/pages/frontline/warning/view/ Summary Conclusions 1. Financial instruments have risk attached to them. Exchange of assets transfers that risk. Example: futures contract, insurance contract 2. Exchanging financial instruments communicates stuff about the issuer and designed so
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This note was uploaded on 02/22/2012 for the course MANEC 453 taught by Professor Jerrynelson during the Winter '10 term at BYU.

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Class 4 Ch 3 Lecture Outline - Class 4; Chapter 3 Financial...

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