FIN 4113 Lecture Notes - Lecture 1: Financial Capital, Expected Return, Secondary Market
Document Summary
Cursed with a mismatch between the timing of outflows and inflows of funds. Important definitions for the study of financial markets . Capital financial assets, real assets and intangible assets that enable future production/consumption to be larger than current production/consumption. Properly functioning financial markets promote the efficient allocation of capital to those uses that are expected to produce the greatest future benefit. To channel funds (immediately spendable balances) from market participants with excess funds (i. e. , lender- Savers ) to market participants with need for additional funds (i. e. , borrower-spenders ) Securities (financial claims) legal contracts representing claims on the security issuers"s future income/assets. Real investment acquisition of real assets with the expectation of producing future income. Financial investment acquisition of financial claims with the expectation of future income. Financial markets allow investors with access to real investment opportunities but insufficient funds, to take advantage of the opportunities. In this way, financial markets improve economic efficiency.
