ECON 2035 Chapter Notes - Chapter 5: Behavioral Economics, General Dynamics, Call Option

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2 Jul 2014
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Securities firms- company whose primary purpose it to hold securities, trade them, or help others trade them; including mutual funds, hedge funds, brokers and dealers, and investment banks. Mutual funds- financial institutions that hold a diversified set of securities and sell shares to savers: legal restrictions on how much risk they can take (cannot borrow, leverage- borrowing money to purchase assets, cannot trade derivatives. Industry consolidation: other financial institutions, pension funds- employers, both private firms and gov, establish funds to provide income to retired workers. Use money to purchase securities and earnings from securities provide retirement benefits: insurance companies- sell life insurance and insurance for property. Insurance pay premiums, company uses to buy securities. Take insurance premiums and invest in money markets: commercial banks- institution that accept deposits and make loans. Own securities (gov. bonds) banks hold bonds for liquidity: can easily sell for cash.

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