FINC412 Lecture Notes - Lecture 5: Open Market Operation, Fiscal Policy, Commercial Paper

• School: University of Delaware
• Department: Finance
• Course: FINC412
• Professor: Infanti Martin

Document Summary

Homework: p. 22-23 2,3,13, 19: types of markets: distinguish between primary and secondary markets, and money and capital markets. Primary markets facilitate the issuance of new securities. Secondary markets facilitate the trading of existing securities, they allow for change in the ownership of the securities. Money markets facilitate the sale of short-term debt securities by deficit units to surplus units (t-bills) Capital markets facilitate the sale of long-term securities by deficit units to surplus units (bonds, mortgages and stocks: distinguish between perfect and imperfect security markets. In a perfect security market, deficit units and spending units connect to facilitate trades that benefit them equally. An imperfect market exists in which trading partners are connected through a financial intermediary: deficit spending units lend money to surplus spending units via a financial intermediary. Inefficient to conduct transaction directly: depository institutions: primary use of funds by commercial banks v savings institutions.