文档介绍：Chapter 1
A modern financial system—an overview Websites: system
Comprises financial institutions, instruments and markets facilitating transactions for goods and services and financial transactions
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Functions of a financial system (cont.)
(cont.)
Functions of a financial system (cont.)
Attributes of financial assets
Return or yield
Total financial compensation received from an investment expressed as a percentage of the amount invested
Risk
Probability that the actual return on an investment will vary from the expected return
(cont.)
Functions of a financial system (cont.)
Attributes of financial assets (cont.)
Liquidity
Ability to sell an asset within a reasonable time at current market prices and for reasonable transaction costs
Time-pattern of cash flows
When the expected cash flows from a financial asset are to be received by the investor or lender
(cont.)
Functions of a financial system (cont.)
Facilitation of portfolio restructuring
The combination of assets and liabilities comprising the desired attributes of return, risk, liquidity and timing of cash flows
Implementation of monetary policy
Actions of a central bank taken to influence interest rate levels to achieve certain economic outcomes
Primary target is inflation
(cont.)
Functions of a financial system (cont.)
An efficient financial system:
encourages savings
directs savings to the most efficient users
implements the monetary policy of governments by influencing interest rates
is a combination of assets and liabilities comprising the desired attributes of return, risk, liquidity and timing of cash flows
(cont.)
Functions of a financial system (cont.)
Since 2007, the financial markets have been characterised by a great deal of volatility
What started as a liquidation of credit derivatives sparked by a fall in house prices in the United States has become a watershed moment in modern financ