FINANCIAL MARKETS AND INSTITUTIONS A MODERN PERSPECTIVEPDF电子书下载

part1 INTRODUCTION AND OVERVIEW OF FINANCIAL MARKETS 1

1 Introduction 2

Why Study Financial Markets and Institutions？：Chapter Overview 2

Overview of Financial Markets 4

Primary Markets versus Secondary Markets 4

Money Markets versus Capital Markets 8

Financial Market Regulation 9

Foreign Exchange Markets 10

Overview of Financial Institutions 11

Unique Economic Functions Performed by Financial Institutions 14

Additional Benefits FIs Provide to Suppliers of Funds 17

Economic Functions FIs Provide to the Financial System as a Whole 18

Regulation of Financial Institutions 20

Globalization of Financial Markets and Institutions 21

2 Determinants of Interest Rates 26

Interest Rate Fundamentals：Chapter Overview 26

Time Value of Money and Interest Rates 27

Time Value of Money 27

Present Values 28

Future Values 30

Interest Rates on Securities with a Maturity of Less than One Year 33

Loanable Funds Theory 36

Supply of Loanable Funds 36

Demand for Loanable Funds 38

Equilibrium Interest Rate 40

Factors that Cause the Supply and Demand Curves for Loanable Funds to Shift 40

Movement of Interest Rates Over Time 45

Determinants of Interest Rates for Individual Securities 45

Inflation 45

Real Interest Rates 47

Fisher Effect 47

Default or Credit Risk 48

Liquidity Risk 48

Special Provisions or Covenants 49

Term to Maturity 50

Term Structure of Interest Rates 52

Unbiased Expectations Theory 52

Liquidity Premium Theory 54

Market Segmentation Theory 55

Forecasting Interest Rates 56

3 Interest Rates and Security Valuation 58

Interest Rates as a Determinant of Financial Security Values：Chapter Overview 58

Various Interest Rate Measures 59

Required Rate of Return 60

Expected Rate of Return 60

Required versus Expected Rates of Return：The Role of Efficient Markets 61

Realized Rate of Return 62

Coupon Rate 62

Bond Valuation 63

Bond Valuation Formula Used to Calculate Fair Present Values 63

Bond Valuation Formula Used to Calculate Yield to Maturity 65

Impact of Interest Rate Changes on Security Values 66

Impact of Maturity on Security Values 68

Maturity and Security Prices 68

Maturity and Security Price Sensitivity to Changes in Interest Rates 69

Impact of Coupon Rates on Security Values 70

Coupon Rate and Security Prices 70

Coupon Rate and Security Price Sensitivity to Changes in Interest Rates 70

Duration 71

A Simple Illustration of Duration 73

A General Formula for Duration 74

Features of Duration 78

Economic Meaning of Duration 78

Large Interest Rate Changes and Duration 81

Appendix：Equity Valuation 83

4 The Federal Reserve System，Monetary Policy，and Interest Rates 89

Major Duties and Responsibilities of the Federal Reserve System：Chapter Overview 89

Structure of the Federal Reserve System 90

Federal Reserve Banks 90

Board of Governors of the Federal Reserve System 97

Federal Open Market Committee 98

Balance Sheet of the Federal Reserve 98

Monetary Policy Tools 100

Open Market Operations 102

The Discount Rate 104

Reserve Requirements （Reserve Ratios） 106

The Federal Reserve，the Money Supply，and Interest Rates 109

Effects of Monetary Tools on Various Economic Variables 109

Money Supply versus Interest Rate Targeting 111

International Monetary Policies and Strategies 115

Impact of U.S.Monetary Policy on Foreign Exchange Rates 116

part2 SECURITIES MARKETS 121

5 Money Markets 122

Definition of Money Markets：Chapter Overview 122

Money Markets 123

Money Market Securities 125

Treasury Bills 126

Federal Funds 132

Repurchase Agreements 133

Commercial Paper 136

Negotiable Certificates of Deposit 139

Banker’s Acceptances 141

Comparison of Money Market Securities 142

Money Market Participants 143

The U.S.Treasury 143

The Federal Reserve 144

Commercial Banks 144

Brokers and Dealers 144

Corporations 145

Other Financial Institutions 145

International Aspects of Money Markets 145

Euro Money Markets 145

Euro Money Market Securities 149

6 Bond Markets 153

Definition of Bond Markets：Chapter Overview 153

Bond Market Securities 154

Treasury Notes and Bonds 154

Municipal Bonds 164

Corporate Bonds 171

Bond Ratings 177

Bond Market Indexes 178

Bond Market Participants 179

Comparison of Bond Market Securities 179

International Aspects of Bond Markets 181

Eurobonds，Foreign Bonds，and Brady and Sovereign Bonds 184

Eurobonds 184

Foreign Bonds 185

Brady Bonds and Sovereign Bonds 185

7 Mortgage Markets 189

Mortgages and Mortgage-Backed Securities：Chapter Overview 189

Primary Mortgage Market 191

Mortgage Characteristics 191

Mortgage Amortization 196

Other Types of Mortgages 199

Secondary Mortgage Markets 201

History and Background of Secondary Mortgage Markets 201

Mortgage Sales 202

Securitization of Mortgages 203

Institutional Use of Mortgage Markets 212

International Trends in Securitization 213

Demand by International Investors for U.S.Mortgage-Backed Securities 213

International Mortgage Securitization 214

8 Stock Markets 218

The Stock Markets：Chapter Overview 218

Stock Market Securities 219

Common Stock 220

Preferred Stock 225

Primary and Secondary Stock Markets 226

Primary Markets 226

Secondary Markets 232

Stock Market Indexes 240

Stock Market Participants 244

Other Issues Pertaining to Stock Markets 246

Economic Indicators 246

Market Efficiency 246

Stock Market Regulations 249

International Aspects of Stock Markets 250

Appendix：Event Study Tests 254

9 Foreign Exchange Markets 256

Foreign Exchange Markets and Risk：Chapter Overview 256

Background and History of Foreign Exchange Markets 258

Foreign Exchange Rates and Transactions 258

Foreign Exchange Rates 258

Foreign Exchange Transactions 260

Return and Risk of Foreign Exchange Transactions 262

Role of Financial Institutions in Foreign Exchange Transactions 267

Interaction of Interest Rates，Inflation，and Exchange Rates 273

Purchasing Power Parity 273

Interest Rate Parity 274

Balance of Payment Accounts 275

CurrentAccount 276

Capital Accounts 277

10 Derivative Securities Markets 280

Derivative Securities：Chapter Overview 280

Forwards and Futures 281

Spot Markets 281

Forward Markets 282

Futures Markets 284

Options 291

Call Options 293

Put Options 295

Option Values 296

Option Markets 298

Regulation of Futures and Options Markets 304

Swaps 304

Interest Rate Swaps 305

Currency Swaps 308

Swap Markets 309

Caps，Floors，and Collars 310

Appendix：Black-Scholes Option Pricing Model 313

part3 DEPOSITORY INSTITUTIONS 317

11 Commercial Banks 318

Commercial Banks as a Sector of the Financial Institutions Industry：Chapter Overview 318

Definition of a Commercial Bank 320

Balance Sheets and Recent Trends 320

Assets 320

Liabilities 322

Equity 324

Off-Balance-Sheet Activities 324

Other Fee-Generating Activities 325

Size，Structure，and Composition of the Industry 328

Economies of Scale and Scope 329

Bank Size and Concentration 335

Bank Size and Activities 336

Industry Performance 339

Regulators 340

Federal Deposit Insurance Corporation 340

Office of the Comptroller of the Currency 340

Federal Reserve System 340

State Authorities 341

12 Thrift Institutions 343

Three Categories of Thrift Institutions：Chapter Overview 343

Savings Associations 344

Size，Structure，and Composition of the Industry 344

Balance Sheets and Recent Trends 348

Savings Banks 350

Size，Structure，and Composition of the Industry 350

Balance Sheets and Recent Trends 350

Regulators of Savings Institutions 351

Savings Association and Savings Bank Recent Performance 352

Credit Unions 354

Size，Structure，and Composition of the Industry 354

Balance Sheets and Recent Trends 359

Regulators 362

Industry Performance 362

13 Depository Institutions’ Financial Statements and Analysis 364

Why Evaluate the Performance of Depository Institutions：Chapter Overview 364

Financial Statements of Commercial Banks 366

Balance Sheet Structure 366

Off-Balance-SheetAssets and Liabilities 374

Income Statement 380

Direct Relationship between the Income Statement and the Balance Sheet 382

Financial Statement Analysis Using a Return on Equity Framework 383

Return on Equity and Its Components 384

Return on Assets and Its Components 390

Other Ratios 393

Impact of Market Niche and Bank Size on Financial Statement Analysis 394

Impact of a Bank’s Market Niche 394

Impact of Size on Financial Statement Analysis 395

14 Regulation of Depository Institutions 398

Specialness and Regulation：Chapter Overview 398

Types of Regulations and the Regulators 399

Safety and Soundness Regulation 399

Monetary Policy Regulation 401

Credit Allocation Regulation 401

Consumer Protection Regulation 401

Investor Protection Regulation 402

Entry and Chartering Regulation 402

Regulators 402

Regulation of Product and Geographic Expansion 403

Product Segmentation in the U.S.Depository Institutions Industry 404

Geographic Expansion in the U.S.Depository Institutions Industry 410

History of Bank and Savings Institution Guarantee Funds 414

FDIC 414

The Federal Savings and Loan Insurance Corporation and Its Demise 415

Causes of the Depository Fund Insolvencies 415

Non-U.S.Deposit Insurance Systems 418

Balance Sheet Regulations 418

Regulations on Depository Institution Liquidity 418

Regulations on Capital Adequacy （Leverage） 419

Off-Balance-Sheet Regulations 422

Foreign versus Domestic Regulation of Depository Institutions 424

Product Diversification Activities 424

Global or International Expansion Activities 424

Appendix A：Depository Institutions and Their Regulators 429

Appendix B：Financial Services Modernization Act of 1999：Summary of Provisions 430

Appendix C：Calculating Minimum Required Reserves at U.S.Depository Institutions 434

Appendix D：Calculating Risk-Based Capital Ratios 438

part4 OTHER FINANCIAL INSTITUTIONS 445

15 Insurance Companies 446

Two Categories of Insurance Companies：Chapter Overview 446

Life Insurance Companies 447

Size，Structure，and Composition of the Industry 447

Balance Sheets and Recent Trends 452

Regulation 454

Property-Casualty Insurance Companies 455

Size，Structure，and Composition of the Industry 455

Balance Sheets and Recent Trends 460

Regulation 467

16 Securities Firms and Investment Banks 470

Services Offered by Securities Firms versus Investment Banks：Chapter Overview 470

Size，Structure，and Composition of the Industry 471

Securities Firm and Investment Bank Activity Areas 473

Investing 474

Investment Banking 474

Market Making 478

Trading 479

Cash Management 482

Mergers and Acquisitions 482

Other Service Functions 482

Recent Trends and Balance Sheets 483

Recent Trends 483

Balance Sheet 486

Regulation 487

17 Finance Companies 490

Finance Company Functions：Chapter Overview 490

Size，Structure，and Composition of the Industry 490

Balance Sheets and Recent Trends 494

Assets 494

Liabilities and Equity 499

Regulation 499

18 Mutual Funds 502

Mutual Funds：Chapter Overview 502

Size，Structure，and Composition of the Industry 503

Historical Trends 503

Different Types of Mutual Funds 504

Mutual Fund Prospectuses and Objectives 511

Size and Mutual Fund Performance：The Case of the Magellan Fund 514

Investor Returns from Mutual Fund Ownership 515

Mutual Fund Costs 517

Mutual Fund Share Quotes 520

Balance Sheets and Recent Trends 521

Money Market Funds 521

Long-Term Funds 522

Regulation 523

19 Pension Funds 525

Pension Funds Defined：Chapter Overview 525

Size，Structure，and Composition of the Industry 526

Insured versus Noninsured Pension Funds 526

Defined Benefit versus Defined Contribution Pension Funds 528

Private Pension Funds 529

Public Pension Funds 537

Financial Asset Investments and Recent Trends 538

Private Pension Funds 538

Public Pension Funds 539

Regulation of Pension Funds 540

part5 RISK MANAGEMENT IN FINANCIAL INSTITUTIONS 545

20Types of Risks Incurred by Financial Institutions 546

Why Financial Institutions Need to ManageRisk：Chapter Overview 546

Credit Risk 547

Liquidity Risk 550

Interest Rate Risk 550

The Federal Reserve and Interest Rate Risk 550

Maturity Mismatching and Interest Rate Risk 551

Market Risk 554

Off-Balance-Sheet Risk 554

Foreign Exchange Risk 555

Country or Sovereign Risk 557

Technology and Operational Risk 557

Insolvency Risk 560

Interaction Among Risks 560

21 Managing Risk on the BalanceSheet Ⅰ：Credit Risk 564

Credit Risk Management：Chapter Overview 564

Credit Analysis 568

Real Estate Lending 568

Consumer （Individual） and Small-Business Lending 571

Mid-Market Commercial and Industrial Lending 571

Large Commercial and Industrial Lending 578

Calculating the Return on a Loan 582

Return on Assets （ROA） 584

RAROC Models 586

Appendix：Loan Portfolio Risk and Management 589

22 Managing Risk on the Balance SheetⅡ：Liquidity Risk 593

Liquidity Risk Management：Chapter Overview 593

Causes of Liquidity Risk 594

Liquidity Risk and Depository Institutions 595

Liability Side Liquidity Risk 595

Asset Side Liquidity Risk 599

Measuring a Bank’s Liquidity Exposure 599

Liquidity Risk，Unexpected Deposit Drains，and Bank Runs 603

Bank Runs，the Discount Window，and Deposit Insurance 605

Liquidity Risk and Insurance Companies 609

Life Insurance Companies 609

Property-Casualty Insurance Companies 609

Guarantee Programs for Life and Property-Casualty Insurance Companies 610

Liquidity Risk and Mutual Funds 611

23 Managing Risk on the Balance Sheet Ⅲ：Interest Rate and Insolvency Risk 614

Interest Rate and Insolvency Risk Management：Chapter Overview 614

Interest Rate Risk Measurement and Management 616

Repricing Model 616

Duration Model 623

Insolvency Risk Management 629

Capital and Insolvency Risk 630

24 Managing Risk with Derivative Securities 640

Derivative Securities Used to Manage Risk：Chapter Overview 640

Forward and Futures Contracts 641

Hedging with Forward Contracts 642

Hedging with Futures Contracts 643

Options 648

Basic Features of Options 648

Actual Interest Rate Options 652

Hedging with Options 654

Swaps 654

Interest Rate Swaps 655

Currency Swaps 658

Credit Risk Concerns with Swaps 660

Comparison of Hedging Methods 661

Writing versus Buying Options 661

Futures versus Options Hedging 662

Swaps versus Forwards，Futures，and Options 663

25 Loan Sales and Asset Securitization 667

Why Financial Institutions Securitize Assets：Chapter Overview 667

Loan Sales 668

Types of Loan Sales Contracts 669

Bank Loan Sale Market 672

Secondary Market for Less Developed Country Debt 675

Factors Encouraging Future Loan Sales Growth 675

Factors Deterring Future Loan Sales Growth 676

Loan Securitization 677

Pass-Through Security 677

Collateralized Mortgage Obligation 683

Mortgage-Backed Bond 686

Securitization of Other Assets 688

Can All Assets Be Securitized？ 689

Glossary 693

Appendix 703

References 711

Index 713