Financial markets, banking, and monetary policy

1 online resource (xviii, 366 pages)

Includes bibliographical references and index

Machine generated contents note: Preface Chapter 1: Introduction What You Will Learn In This Chapter Overview Where We Are Going in This Book Contributions Made By the Financial System Recurring Themes in the Chapters Ahead Resources Chapter 2: Overview of the Financial System What You Will Learn In This Chapter Introduction Features of An Effective Financial System Direct Methods of Finance Indirect Methods of Finance Primary versus Secondary Markets Chapter 3: The Special Role of Commercial Banks What You Will Learn In This Chapter Background Commercial Bank Balance Sheet Payment System and Money Liquidity Provision Dealing with Asymmetric Information Maturity Transformation The Safety Net and Regulatory Policy Chapter 4: The Pricing of Financial Assets What You Will Learn In This Chapter Background Present Value Maturity and Price Sensitivity Holding Periods versus Maturities Return versus Yield Duration Nominal versus Real Yields Appendix A: Variations Of The Valuation Relationship Appendix B:Solutions Using A Financial Calculator Chapter 5: Factors Affecting Yields What You Will Learn In This Chapter Background The Term Structure of Interest Rates Credit Risk Liquidity Taxation Embedded Options Flights to Safety Chapter 6: Principles of Portfolio Selection and Efficient Markets What You Will Learn In This Chapter Overview Uncertainty, Expected Return, and Risk Selecting a Portfolio Efficient Portfolops And Risk-Return Trade-Offs Efficient Markets Hypothesis Chapter 7: The Money Market What You Will Learn In This Chapter Background and Basic Features of the Money Market Pricing Treasury Bills The Role of Commercial Banks in the Money Market Letters of Credit and Bankers Acceptances Monetary Policy Effects on the Money Market Chapter 8: The Bond Market What You Will Learn In This Chapter Background Treasury Notes and Bonds Corporate Bonds Munis Government-Sponsored Enterprises (GSEs) The Impact of Monetary Policy on the Bond Market Chapter 9: Securitization What You Will Learn In This Chapter Background Obstacles to Overcome Beginnings of Securitization-MBS Other Securitized Loans-Consumer ABS ABS Involving Business Credit-CDOs and Structured Securities Securitization and the Integration of Credit Markets Monetary Policy and Securitization Chapter 10: The Mortgage Market What You Will Learn In This Chapter Background Home Mortgages Commercial Mortgages The Mortgage Market and Monetary Policy Chapter 11: The Equity Market What You Will Learn In This Chapter Background Equities as a Source of Corporate Finance Preferred versus Common Shares Primary and Secondary Markets Valuation of Individual Shares Price-earnings Extending These Principles to the Stock Market Monetary Policy and the Stock Market Indexes of Stock Prices Chapter 12: Central Banking and the Federal Reserve What You Will Learn In This Chapter Background Origins of Central Banks Constitutional Foundations The Century And A Quarter Without A Central Bank Creation of the Federal Reserve Early Years of the Federal Reserve Reforms of the 1930s Fed Independence Central Bank Accountability and Transparency Central Bank Responsibilities Monetary Operations Chapter 13: Monetary Policy: The Basics What You Will Learn In This Chapter Background The Operational Counterparts to Maximum Employment and Price Stability Aggregate Demand and Aggregate Supply The Model Addressing Inflation Addressing a Shortfall in Output Okun's Law Chapter 14: Monetary Policy: Challenges Faced by Policymakers What You Will Learn In This Chapter Background Other Forces Affecting Output and Inflation Lags and Other Complications Policy Rules Expectations and Central Bank Credibility Inflation Targeting The Zero-Bound Constraint and the Slow Recovery from the Great Contraction Chapter 15: Financial Crises What You Will Learn In This Chapter Background Classic Banking Panics The Nightmare of the Great Depression The Financial Crisis Common Threads Chapter 16: The Foreign Exchange Market and Exchange Rate Regimes What You Will Learn In This Chapter Background Features of the Market The Relation Between Spot and Forward Exchange Rates Long Run Exchange Rate Relationships The Real Exchange Rate Exchange Rate Determination in the Shorter Run Floating Exchange Rate Regime Fixed Exchange Rate Regime Chapter 17: Depository Institutions What You Will Learn In This Chapter Background Organization of Commercial Banks and Other Depository Institutions Economic Functions of Depository Institutions The Balance Sheet of the Commercial Banking System The Balance Sheet of Savings Institutions The Balance Sheet of Credit Unions Deposit Insurance Regulation and Supervision of Depository Institutions Depository Institutions and Monetary Policy Chapter 18: Mutual Funds What You Will Learn In This Chapter Background History SEC Regulation Role of Mutual Fund Complexes Types of Funds Open-End Funds Exchange-Traded Funds Closed-End Funds Mutual Funds and Monetary Policy Chapter 19: Hedge, Venture Capital, and Private Equity Funds What You Will Learn In This Chapter Background Commonalities In Structure Hedge Funds Venture Capital Funds Private Equity Funds Alternative Investment Funds and Monetary Policy Chapter 20: Large Institutional Investors What You Will Learn In This Chapter Background Pension Funds Life Insurance Companies Property and Casualty Insurance Companies Large Institutional Investors and Monetary Policy About the Author Index

Financial Markets, Banking, and Monetary Policy; Contents; Preface; CHAPTER 1 Introduction; What You Will Learn in This Chapter; Overview; Where We Are Going in This Book; Contributions Made by the Financial System; Transfers of Resources from Surplus to Deficit Units; Other Contributions; Recurring Themes in the Chapters Ahead; Resources; CHAPTER 2 Overview of the Financial System; What You Will Learn in This Chapter; Introduction; Features of an Effective Financial System; Direct Methods of Finance; Investment Banks; Debt versus Equity; Money versus Capital Markets; Asymmetric Information

Adverse SelectionMoral Hazard; Indirect Methods of Finance; Primary versus Secondary Markets; Primary-Market Transactions; Secondary-Market Transactions; Trading Platforms; Brokers; CHAPTER 3 The Special Role of Commercial Banks; What You Will Learn in This Chapter; Background; Commercial Bank Balance Sheet; Assets; Liabilities; Net Worth (Capital); Payment System and Money; Commercial Banks and the Payment System; Payment System Infrastructure; Credit and Stored Value Cards; Payments Media in the Money Stock; Velocity (Turnover of Money); Liquidity Provision

Dealing with Asymmetric InformationMaturity Transformation; The Safety Net and Regulatory Policy; CHAPTER 4 The Pricing of Financial Assets; What You Will Learn in This Chapter; Background; Present Value; Value of a Single Future Payment; Value of a Coupon Security; Other Applications; Solving for Yield to Maturity; Solving for Fixed Payments; The Special Case of a Consol; Maturity and Price Sensitivity; Holding Periods versus Maturities; Return versus Yield; Duration; Nominal versus Real Yields; Appendix A: Variations of the Valuation Relationship

Appendix B: Solutions Using a Financial CalculatorFuture Value; Future Value-A Higher Interest Rate; Present Value of Single Cash Flow; Lottery Choice; Current Price of a Coupon Security; Price of an Aasset Providing Uneven Cash Flows; Yield to Maturity; CHAPTER 5 Factors Affecting Yields; What You Will Learn in This Chapter; Background; The Term Structure of Interest Rates; The Expectations Hypothesis; The Term Premium Hypothesis; Market Segmentation Hypothesis; Implicit Forward Rates; The Role of the Term Structure; Credit Risk; Credit Rating Agencies

Investment-Grade versus Below-Investment-Grade DebtCyclical Behavior of Credit Risk and Spreads; Credit Default Swaps (CDSs); Changing Investor Tolerance for Risk; Liquidity; Taxation; Embedded Options; Flights to Safety; CHAPTER 6 Principles of Portfolio Selection and Efficient Markets; What You Will Learn in This Chapter; Overview; Uncertainty, Expected Return, and Risk; Selecting a Portfolio; Expected Return; Risk; Interpreting the Expression for Risk; An Illustration; These Principles in Practice; Efficient Portfolios and Risk-Return Trade-Offs; Efficient Markets Hypothesis

Implications for a Random Walk

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