《金融学》（第二版） 课件 （英文） -Chapter02 Financial Markets and Institutions

Chapter2:

FinancialMarketsand InstitutionsObjectiveUnderstandingtheworkingsofthefinancialsystemDeterminingratesofreturn1Chapter2Contents2.1WhatisaFinancialSystem?2.2TheFlowofFunds2.3TheFunctionalPerspective2.4FinancialInnovation&the“InvisibleHand”2.5FinancialMarkets2.6FinancialMarketRates2.7FinancialIntermediaries2.8FinancialInfrastructureandRegulation2.9Governmental&Quasi-GovernmentalOrganizations2TheFinancialSystemFinancialdecisionsaremadewithinthecontextofafinancialsystemThefinancialsystembothconstrainsandenablesthedecisionmakerThischapterprovidesaframeworkforunderstandinghowfinancialsystemswork32.1WhatistheFinancialSystem?AFinancialSystemiscomprisedofmarkets,intermediaries,servicefirmsandotherinstitutionsusedtocarryoutthefinancialdecisionsofhouseholds,businessfirms,andgovernments4GeographyoftheMarketssomemarketsforaparticularmarketinstrumentmayhaveawelldefinedgeographiclocationsuchastheNewYorkStockExchangeortheOsakaOptionsandFuturesExchangeothermarketinstrumentsaretradedonover-the-counteroroff-exchangemarketsforbonds,stocks,andforeignexchange5ContractualJurisdictionsThejurisdictiongoverningatradeneedstobeclearlyestablishedbeforemakingsignificantinvestments,particularlywhentradingoveracomputernetworkJurisdictionalconflictsaretoofrequent,andhavesignificanteconomicconsequencesbecauselegalprinciplesvarysignificantlybetweenjurisdictions62.2TheFlowofFundsFundsmayflowfromthesurplusunittothedeficitunitDirectlyThroughmarketsThroughintermediaries7FinancialIntermediaryafirmwhoseprimarybusinessistoprovidefinancialservicesandfinancialproductsExamples:bank(checkingaccounts,loans,CDs…)investmentcompany(mutualfunds…)insurancecompany(termlifeinsurance…)8TheFlowofFundsDiagramMarketsIntermediariesSurplusUnitsDeficitUnits9TheFlowofFundsDiagramWeshallexaminevariouspathwaysfromthesurplusunittothedeficitunit10FundFlowsviaMarketAhouseholdwithsurplusfundsinveststhemingovernmentbonds11FundFlowsviaMarketMarketsIntermediariesSurplusUnitsDeficitUnits12FundFlowsviaIntermediaryHoldersofsurplusfundsmayuseanintermediary,suchasabank,toinvestthem.Thebankreceivesthesurplusfunds,sayas90-daydeposits,andaddsthemtothebank’sassets(creatingabankliability).Moneyisfungible,sothecorrespondingloancannotbeidentified13FundFlowsviaIntermediaryMarketsIntermediariesSurplusUnitsDeficitUnits14FundFlowsviaIntermediaryandMarketSometimestheintermediaryitselfhassurplusfunds,andinveststheminthemarketoranotherintermediaryAbankthatborrowsandinvestsinthemoneymarketcanincreaseitsflexibility,reduceitsrisks,andturnaprofitEventually,thesurplusfundsareconsumedbyadeficitunit15FundFlowsviaIntermediaryandMarketMarketsIntermediariesSurplusUnitsDeficitUnits16FundFlowviaMarketsandIntermediariesIntermediariessuchasGeneralMotorsAcceptanceCorporationissuecommercialpapertofinancecarloansandleasesmadetohouseholdsneedingacarInthiscase,thepaperhasashortermaturitythantheloan,leadingtoarisk17FundsFlowviaMarketsandIntermediaries

MarketsIntermediariesSurplusUnitsDeficitUnits18FundsFlow:DisintermediationSometimesthecostofusingmarketsandintermediariescannotbejustified,andsurplusunitsanddeficitunitscontractdirectlyatitsdiscretion,thedeficitunitmayrepurchasecontractsbeforetheirmaturity,(ataproperdiscount),toavoiddisruptingsecondarymarkets,andtoaddliquidity19FundsFlow:DisintermediationMarketsIntermediariesSurplusUnitsDeficitUnitsMarketsIntermediariesSurplusUnitsDeficitUnits20FundsFlow:SecuredCreditPoorcreditriskssometimesreceivecreditcardapplicationsfrombanksofferinga$1,000creditlimit,if$1,000isdepositedintoasavingsaccountascollateral19.56%ischargedonthecardbalance,while3.5%ispaidondeposits.Ahighannualfeeisalsocharged21FundsFlow:SecuredCreditMarketsIntermediariesSurplusUnitsDeficitUnitsPoorCreditRisk222.3FunctionalPerspectiveAU.S.bankstodaydiffersfroma1928U.S.bank,andaSaudibanktoday.AcreditunionintheU.S.todaysharesmanyofthesamefunctionsasaU.S.bankAnalyzinginstitutionsfromafunctionalperspectivehelpsustounderstandwhyinstitutionsdifferovertimeandjurisdiction23SixKeyFinancialFunctions:TransferringResourcesAcrossTime&SpaceManagingRiskClearingandSettlingPaymentsPoolingResourcesandSubdividingSharesProvidingInformationDealingwithIncentiveProblems24TransferringResourcesAcrossTimeandSpaceAfinancialsystemprovideswaystotransfereconomicresourcesthroughtime,acrossgeographicregions,andamongstindustries25TransferringResourcesAcrossTimeandSpace(Illustration)ADutchhouseholdcurrentlyhasexcessfundsneededintenyearsAChinesebusinesswouldbecomemoreprofitablewithnewinvestmentfundsFinancialmarketsmakethismatch26ManagingRiskAfinancialsystemprovideswaystomanageRisk27ManagingRisk

Futureflowshaveassociatedrisks.Likeflows,risksmaybeunbundleandrepackagedbyafinancialsystemusingportfolios,financialderivatives,andguaranteesManyfinancialcontractstargetrisksratherthanflows28ManagingRisk

Afundmanagermayincreasesrisk(andexpectedreturns)ofafundbyissuingbondssecuredagainstthefundsassets,writingputoptions,buyingcalloptions,andgoing“long”marketindexfuturesAnotherfundmanagermaydecreaseriskbyinvestinginthemoneymarket,putoptions,andshortindexfutures29ClearingandSettlingPaymentsAfinancialsystemprovideswaysofclearingandsettlingpaymentstofacilitatetheexchangeofgoods,services,andassets30ClearingandSettlingPaymentsBarter(Levijeans,oldstamps&coins)Gold(requirespurityassay,heavy)Papermoney(restrictedgeographically)Creditcards(notuniversallyaccepted)Personal,cashier'sortraveler’schecks(acceptabilityvaries,denomination)31PoolingResourcesandDividingOwnershipinLargeAssetsAfinancialsystemprovidesamechanismforthepoolingoffundstoundertakelarge-scaleindivisibleenterpriseorforthesubdividingofsharesinlargeenterpriseswithmanyowners32PoolingResourcesandDividingOwnershipinLargeAssetsT-billshaveaminimumfacevalueof$10,000,buthaveverylowrisk(Solution:moneymarketmutualfund)Developingapromisingtechnologywouldexposeasinglefirmtotoomuchcapitalrisk(Solution:jointventure)Ahouseholdwishestodivestitselfofitsownershipinachainofrestaurants(Solution:Formacorporation,andsellitsstock33ProvidingInformationAfinancialsystemprovidespriceinformationthathelpscoordinatedecentralizeddecision-makinginvarioussectorsoftheeconomy34ProvidingInformationInvestorsneedcurrentpricestoevaluatetheirportfoliosofquotedsecuritiesQuotedpricesmaybeusedtoestimatethevalueofsimilarnon-quotedsecuritiesOptionpricesmaybeusedtodeterminethemarket’sassessmentofastock’srisk35FamilyLoans:AdvantagesFavorableinformationaboutyouthat’savailabletoyourfamilymaynotbeavailabletocommerciallendersThisaberrationleadstoanopportunityYoumaybeabletoobtainafamilyloanatalowerinterestrateYourfamilymembermaymakeahigherreturnonasimilarrisk36FamilyLoans:DisadvantagesFamilyloanstendtobehardertocollect,becausecollectionmaythreatenfamilytiesFamilymembersareoftennaivewhenevaluatingthecreditriskoflovedonesCommerciallyavailableinvestmentsareliquid,andoffermoreappropriatecashflowsandrisk-rewardtradeoffsThefamilylenderisexposedtoindividualriskthatisdiversifiedaway(withoutsignificantcost)inacommercialinvestment37DealingwithIncentiveProblemsAfinancialsystemprovideswaystodealwiththeincentiveproblemsthatoccurwhenonepartytoafinancialtransactionhasinformationthattheotherpartydoesnot,orwhenonepartyisanagentandmakesdecisionsforanother38MoralHazardAsituationinwhichhavinginsuranceagainstsomeriskcausestheinsuredpartytotakegreaterriskortotakelesscareinpreventingtheeventthatgivesrisetotheloss.39Moral-HazardAdamentersintoaninsurancecontractwithCarmel.AdampaysCarmelapremiumof$10,000.CamelwillreimburseAdam’scostsshouldafiredamagehisbusinessduringthenextyear,butpaynothingotherwise.Adambelieveshecanreducetheprobabilityoffirebyinstallingacheapsprinkler.Withoutthecontracthewouldcertainlyinstalltheunit,buthegainsnothingbyinstallingtheunitwiththeinsurancecontractinforce.Adamisexposedtoamoralhazard.AdamisnowtakinglesscareofhisassetsnowthatCarmelhasassumedtheriskoftheirloss40AdverseSelectionAtypeofincentiveprobleminwhichthosewhopurchaseinsuranceagainstriskaremorelikelytobeatriskthanthegeneralpopulation.41AdverseSelectionCarmelhasidentified100businessesthatfallintothecategoryofhavingafloodonaverageonceevery200-years.Basedonthisestimate,Carmelsetsapremiumbasedon1%oftheinsuredamount.Adam’sbusinessisoneofthe100,andheacceptsthecontractbelievingthathisbusinesspremisesaresubjecttofloodaboutevery50-years.Dillip’sbusinessisanotherofthe100,buthedoesnotacceptthecontractbecausehebelievesthatthereisalmostnochanceofflooddamaginghisbusiness42Principal-AgentProblemAsituationarisingwhenagentsdonotmakethesamedecisionsthattheprincipalswouldhavemadeiftheprincipalsknewwhattheagentsknewandweremakingthedecisionsthemselves.43Principal-AgentProblemsAdamisthereal-estateagentmarketingCarmel’shousethat’sworth$200,000fora6%commissionAdam’sagencyhasamultiple-listingagreementwithotheragencies,wherebylistingagentsreceive2.5%,andsellingagentsreceive3.5%Bernadettewishestobuythehomeforonly90%ofitsmarketvalue,$180,000.AdamurgesCarmeltoaccepttheoffer.Why?theagencywillreceiveonly$5,000ifitissoldbyanotheragencyatfullvaluetheagencymakes$10,800ifAdamcanpersuadeCarmeltosellatthelowerprice44InsureandBurnAbusinesshasawarehousefullofunfashionableclothesTheownerarrangesforinsuranceatabovetruemarketvalueforthewarehouse,itscontent,andlossofbusinessAfireisthensettocollecttheinsurance45InsureandBurn:SolutionsMoralriskincreaseswith[marketvalue-insuredvalue],so:understandthebusinessofinsuredcompaniesinsisttheinsuredassumessomeriskoflossavoid“unlucky”ownerswithdubiousmoralitygainareputationforaggressiveforensicinvestigationsrequiretheuseofmodernsurveillance,detectionandprotectiveequipment46InsureandBurn:Consequences

Insurancebecomesover-priced,giventherisks,leadingtoreduceduseInsurancecompaniesareexposedtomoreclaimsduringrecessionsTheeconomylosesassetsthatitwouldhavehadAbarriertoentryiscreatedfornew(honest)businessesthatlackaclaimstrack-recordIncreasedadministrativecostsLongerverificationdelayswhensettlingclaims47SmallBusinessAsasmallbusinessowner,yourlevelofeffortmaydependonthesourceofborrowingIfmoneywasborrowedfromafriend,ratherthanabank,youmayworkharder.ItishardtoletdownafriendIfthemoneywasborrowedfromabank,ratherthanafriend,youmayworkharder.BanksarelessforgivingthanfriendsIfyourbehaviordependsuponthesourceofaloan,thenyouarethevictimofmoralhazard48AdverseSelectionYouhaveapaininyourchest,obtainlifeinsurance,andthenvisityourdoctorTheinsurancecompanyhasfraudulentlyassumedahighriskKnowingthatyouwilldiesoon,youwon’tnowpurchasethatlifeannuity,leadingtoanon-fraudulentadverseselectionAsymmetricalinformationhasresultedinadverseselectionInsurancecompaniesadjusttheirpremiumsforadverseselection49AdverseSelectionSomeinsurancecompaniesexploitrulesdesignedtoprotectthemagainstfraudulentadverseselectionYouvisitthedoctorwiththeusualspectrumofmedicalcomplaints,thedoctortakesnotes,andneitherofyouareconcernedYouobtain$1,000,000inlifeinsuranceingoodfaithLater,acarmountsthesidewalk,killingyouTheinsurancecompanyrefusestopayyourestate,claimingapreexistingconditionfoundinyourrecordsthatwouldhavecausedthemtorefusetherisk50Principal-AgentProblemYourarestilldead.Yourspousedials:1-555-SUE-THEM,andagreestothelawyer’s33.33%contingencyTheinsurancecompanyofferstosettlethe$1,000,000claimfor$300,000Acceptanceoftheofferearnsthelawyerarisk-less$100,000fortwohoursworkRejectingtheofferleadstohigherriskandexpectedreward,butattheexpenseofconsiderabletrialpreparationThelawyeradviseshervulnerableclienttosettleSomeinsurancecompanies“size”theirsettlementtobeattractiveprimarilytothelawyer,whowillthen“sell”ittotheirclient51Principal-AgentExamplesAnemployeeselectsanairline,hotelorcarrentalcompanytoobtainfreeflightmileageforpersonaluseThedecisionhasbeenmadeininterestoftheemployee,ratherthanthecompanyThecompanymaylosetime,orpayahigherpriceforservice52Principal-AgentExamplesAsuppliergivesgiftstoitscustomers’employeeshavinginfluenceoverpurchasedecisionsTraditionally,thesegiftsincludeCaribbeansweepstakes,giftvouchers,entertainment,andoutrightbribesThesupplierisattemptingtosubvertemployeeloyaltybycreatinganprincipal-agentconflictInsomeindustriesthereisatradition,toleratedbyhighermanagement,ofaccepting“adultentertainment”fromsuppliersInadditiontoperpetuatinganprincipal-agentconflict,bothcompaniesexposethemselvestolargesexualdiscriminationsuitsfromfemalebuyersandsalespeople532.4FinancialInnovation&the“InvisibleHand”Financialinnovationoccursspontaneouslyfromtheindividualactionsofentrepreneursandfirms,andnotfromtheactionsofacentralauthority.Example:Creditcards542.5FinancialMarkets:ByBasicFinancialAssetsDebt(Alsocalledfixedincomesecurities,BondsandLoans)FixedIncomeInstrumentspromisingfixedfuturepaymentsEquities(CommonStock/Shares)Residualclaimonassets.LimitedliabilityDerivatives(Options,Forwards,Futures)Securitiesthatderivetheirvaluefromothersecurities55Markets:ByMaturityMoneyMarketMostlydebtinstrumentsissuedbygovernmentsandsecurelargecorporationsHighlyliquid:QuicklyconvertibletocashGloballyintegratedCapitalMarketEquities,anddebtinstrumentswithalifegreaterthanayear562.6FinancialMarketRates

InterestratesExchangeratesStock-marketindicators57FinancialMarketRatesInterestRatesThePromisedrateofreturn.Examples:MortgagerateCommercialRateDependupon:UnitofaccountMaturityDefaultRisk58UnitofAccountThemediuminwhichthepaymentsaredenominatedUsuallyacurrency,butmaybeacommoditysuchasgold,silver,astandard“basket”ofgoodsandservices59Exchange-RateRiskonT-BillsAbondissuedbyacentralgovernmentisrisk-freeonlyinthatcountryThebond’sreturninaforeigninvestor’scurrencyisuncertainbecauseexchangeratesfluctuate,andfuturecashflowsaredenominatedinthedomesticcountry’sunitofaccount60OtherRisksonT-BillsT-Billsaredefault-free,butnotrisk-lessYouobservethatthe12-monthT-Billhasahigheryieldthanthe6-monthT-Bill.YouplantotakeadvantageofthisbybuyingaT-Billwithamaturityof12months,andplantosellitafter6monthstopaycollegefees.Interestratefluctuationsresultinaslightlyhigher(orlower)thanexpectedcapitalreturnOccasionally,the3-monthratemaybehigherthanthe6-monthrate,butrolling-overa3-monthbillresultsinrisk,tooEvena6-monthbillisnotrisk-lesstoyouifinflationisuncertain.Thiscollegemayincreasefeesby20%61Example:ExchangeRateRiskSuppose:YouareaJapaneseInvestorwishingtomakea1-yearinvestmentCurrentexchangerate(Spot)of150Japaneseyen/poundsterlingJapanesebondsyield3%Britishbondsyield9%Investment15,000¥Crystalball:Spot1-yearfromnow140¥/£

62ExchangeRateExample15000¥15260¥15450¥£100£109Time3%¥/¥(direct)1.73%¥/£/£/¥150¥/£9%£/£140¥/£JapanU.K.63ExchangeRateExampleThecurrencyspeculationdoesn’t

pay-offunderthisscenario.Itreturnsonly1.73%,whichisbelowthe3%offeredbyadirectJapaneseinvestmentAnewcrystalballindicatesthatthecorrectexchangerateone-yearfromnowisnot140,but149,YenperPoundObservethatthecurrencyspeculationdoespay-offunderthisscenario.Itreturns8.27%,whichisabovethe3%offeredbyadirectinvestment64ExchangeRateExample15000¥16241¥15450¥£100£109Time3%¥/¥(direct)8.27%¥/£/£/¥150¥/£9%£/£149¥/£JapanU.K.65ExchangeRateExampleOurJapanesespeculatornowseesabusinessopportunityShewillofferfinanciallysoundJapanesecompaniesdoingbusinessinLondonacontractthatobligatesbothherselfandthemtobuyorsellpoundsforYenatafixedexchangerateoneyearfromnow66ExchangeRateExampleHerideaistoissue,orpurchase,risk-free1-yearbonds(Shehasasuperbcreditrating)inYen,andinvesttheproceedsin1-yearBritishbondsDoingthissheiscreatingaderivativesecuritythatshecallsaForwardExchangeRateContract67ExchangeRateExample15000¥(borrowed)15450¥15450¥Repaid£100Invested£109MaturesTime3%¥/¥(direct)3%¥/£/£/¥150¥/£9%£/£Forward¥/£JapanU.K.68ExchangeRateExampleNote:Thisisfor1year,buttheanalysisiseasytogeneralize69MaturityThematurityofafixed-incomeinstrumentisthedateof,orperiodto,itsfinalcashflowTheinterestrateonshort-terminstrumentsmaybehigher,lowerorthesameaslong-terminstruments70U.S.TreasuryYieldCurve

Source:BMay26,3006.71DefaultRiskThepossibilitythatsomeportionoftheinterestortheprincipalonafixed-incomesecuritywillnotbepaidinfullThegreatertheperceiveddefaultrisk,thehighertheinterestratetheissuermustpromisetogiveYieldSpread(SeenextTable)72YieldComparisons73FinancialMarketRatesRatesofReturnonRiskyAssetsManyassetsdonotpromisearateofreturnRealEstateEquitySecuritiesWorksofArtReturncomesfrom:AnyCashFlowsfromtheAssetCapitalGains74HoldingPeriodReturnAssume:PurchasepriceofSharewas$100Sellingprice1-yearlaterwas$105Cashdividendspaidinyearwere$575ComputationofReturn76FinancialMarketRatesMarketIndexesandMarketIndexingOveralllevelofstockprices,AbenchmarkUS:DJI,SP500Japan:Nikkei,TopixUK:FT-30,FT-100Germany:DAXFrance:CAC40Switzerland:CreditSuisseEurope,Australia,FarEast:MSCI,EAFE77FinancialMarketRatesRatesofReturninHistoricalPerspectiveThefollowinggraphsshowthereturnsofselectedsecuritiesandinflationThefirstshowsannualreturnsThesecondshowsaffectson$1investedin1925.Thescaleislogarithmicinordertoshowallthegraphsonthesamechart78StockFundOperatingExpenseRatios(percent,1990-2003)79TurnoverRateExperiencedbyStockFundInvestorsRemainsLow

(percent,1971-2005)80FundShareholdersPayLower-than-average-ExpensesinStockFunds

(percent,1990-2005)8182TotalReturnIndices(1926-2004)83AnnualReturns(1926-2003)8485FinancialMarketRatesInflationandRealInterestRatesNominalPrices&RatesPricesandratesexpressedintermsofcurrencyRealPrices&RatesPricesandratesexpressedintermsofpurchasingpower86NominaltoReal87FinancialMarketRatesInterestRate