ECON 1 Lecture Notes - Lecture 16: Eurocurrency, Corporate Bond, Alternative Investment Market
Document Summary
Understanding finance theory and practice the financial system. The financial markets: a financial market is any mechanism for trading financial assets or securities, a security is a legal contract giving the right to receive future benefits under a stated set of conditions. Examples: house mortgage, lease on a car, shares, bonds, derivatives (options, futures) Main financial markets: there are four main categories of financial markets, money markets, capital markets, foreign exchange markets, derivatives markets. Money markets: marketable securities with maturity less than one year (i. e. treasury bills, main players, largely dominated by major banks, governments, large companies, other money markets: Inter-bank markets: banks lend short-term funds to each other: euro-currency market: banks lend and borrow in foreign currencies. Capital markets: marketable securities with maturity more than one year (i. e. shares, stock exchanges are capital markets, since shares have a long-term maturity, bond markets are also capital markets, trading, long-dated government bonds, corporate bonds.
