FI 457 Lecture Notes - Lecture 25: Adverse Selection
Document Summary
Deficit entities (borrowers) obtain funds directly from surplus entities (lenders) by selling securities (debts or shares) directly to them. Deficit entities obtain funds through an intermediary who obtains funds from surplus entities. Intermediation services are provided to both sides of transactions by the intermediary entity, such that both sides get a cheaper transaction than through direct finance, and the intermediary covers its costs including profit as well. Financial markets promote economic efficiency by producing an efficient. Allow those in need of funds to obtain funds from those with excess funds. physical central locations; communications networks. The primary route for moving funds from savers (lenders) to spenders (borrowers) in the world economy. less; less. The greater the adverse selection problems (asymmetric information problems in general) the ____ channeling of funds, and the ____ efficient channeling of funds will occur. Channel funds from economic entities that have saved surplus funds to those that have a deficit or shortage of funds.
