文档介绍：Introduction to . Financial
Markets and Instruments
Federal Reserve Bank of New York
Central Banking Seminar
Preparatory Workshop in Financial Markets,
Instruments and Institutions
e Zanjani
October 17, 2005
Financial Markets channel funds from those who have savings,
but no productive uses for them, to those who have productive
investments, but insufficient funds to carry them out. In other
words, financial markets move funds from those who "save" to
those who "spend" on productive capital.
Savers = Investors & Lenders: Households
(in order of importance) Businesses
Foreigners
Government
Spenders = Borrowers: Households
Government
Businesses
Foreigners
2
. Credit Market Borrowing by Sector
2,500
2,000
s
r
a
l
l
o 1,500
D
Nonfin. Business
f
o
s
n 1,000
o
i
l
l
i
B
500
State & Local Govts. Households
Federal Government
0
5 7 9 1 3 5 7 9 1 3 5 7 9 1 3 5 7 9 1 3
6 6 6 7 7 7 7 7 8 8 8 8 8 9 9 9 9 9 0 0
9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 0 0
1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2
Source: Federal Reserve Board Flow of Funds
3
Flow of Funds Through the Financial System
Indirect Finance
Financial
Intermediaries
FU
S N
ND ts D
U en S
F m In
ru s
st tru
In m
en
ts
FUNDS FUNDS
Financial
Markets
Lenders
Instruments Instruments Borrowers
Direct Finance
4
Workshop Topics
Intermediaries
– Types
– Function and operations
Instruments
– Types (., equity versus debt)
– Pricing issues
Markets
– Primary markets
– Secondary markets (exchanges, OTC)
Overarching theme: How does the structure of the financial
system address the critical issues faced by participants?
–Risk
–Asymmetric information
5
Asymmetric Information Problems in Finance
Adverse Selection:
— Firms and individuals with the highest risk projects to finance
have the greatest incentive to conceal the riskiness of their projects
and seek out investors and lenders.
— As a res