Financial Institutions: Markets and Money

ISBN-13: 9781119589983 / Angielski / Miękka / 2019 / 678 str.

David S. Kidwell;David W. Blackwell;David A. Whidbee

Spis treści

TABLE OF CONTENTSPart I The Financial System 1Chapter 1 An Overview of Financial Markets and Institutions 3Chapter Preview 4Learning Objectives 41.1 The Financial System 41.2 Financial Markets and Direct Financing 7Do You Understand? 10People & Events: A Brief Examination of the Causes and Effects of the Global Financial Crisis of 2007 and 2008 111.3 Types of Financial Markets 121.4 The Money Markets 141.5 The Capital Markets 15Do You Understand? 171.6 Financial Intermediaries and Indirect Financing 17Do You Understand? 221.7 Types of Financial Intermediaries 23Do You Understand? 271.8 The Risks Financial Institutions Manage 281.9 Regulation of the Financial System 29People & Events: Systemically Risky Banks: What is the Solution? 331.10 Ethics and the Financial System 33Do You Understand? 35Summary of Learning Objectives 35Key Terms 36Questions and Problems 36Chapter 2 The Federal Reserve and Its Powers 38Chapter Preview 39Learning Objectives 392.1 Origins of the Federal Reserve System 39People & Events: Banking before 1933, Banking from 1933 to 1980, and Banking in the Modern Era 432.2 The Current Structure of the Fed 442.3 Monetary Powers of the Board of Governors 472.4 The Fed's Regulatory Powers 472.5 Independence of the Fed 51Do You Understand? 532.6 The Fed's Balance Sheet 532.7 The Fed's Role in Check Clearing and the Growth of Electronic Payments 59Learning by Doing 2.1: Computing a Bank's Excess Reserve Position 602.8 Federal Reserve Tools of Monetary Policy 61People & Events: The Challenges of Fed Chair Janet Yellen 62Learning by Doing 2.2: Calculating a Bank's Reserve Position 66Summary of Learning Objectives 69Key Terms 69Questions and Problems 69Chapter 3 The Fed and Interest Rates 71Chapter Preview 72Learning Objectives 723.1 Federal Reserve Control of the Money Supply 723.2 The Fed's Influence on Interest Rates 753.3 The Treasury Department and Fiscal Policy 79Do You Understand? 813.4 Goals of Monetary Policy 82People & Events: The Fed as Lender of Last Resort During the Financial Crisis 873.5 The Fed and the Economy 88People & Events: Black Monday 913.6 Complications of Monetary Policy 913.7 Anatomy of a Financial Crisis 93People & Events: Good Work If You Can Get It: Executive Bonuses During Bailouts? 100Do You Understand? 101Summary of Learning Objectives 102Key Terms 102Questions and Problems 102Part II How Interest Rates are Determined 105Chapter 4 The Level of Interest Rates 107Chapter Preview 108Learning Objectives 1084.1 What are Interest Rates? 1084.2 The Real Rate of Interest 1094.3 Loanable Funds Theory of Interest 111Do You Understand? 1144.4 Price Expectations and Interest Rates 1144.5 A Restatement of the Fisher Equation 116People & Events: What Is the Actual Inflation Rate? 117Do You Understand? 121People & Events: Estimating the Expected Rate of Inflation from TIPS 1224.6 Forecasting Interest Rates 1224.7 Interest Rates and Currency Values 124Summary of Learning Objectives 125Key Terms 126Questions and Problems 126Chapter 5 Bond Prices and Interest Rate Risk 127Chapter Preview 128Learning Objectives 1285.1 The Time Value of Money 128Do You Understand? 1305.2 Bond Pricing 131People & Events: Bond Market Liquidity and the Volcker Rule 132Learning by Doing 5.1: Calculating the Price of a Bond Using a Financial Calculator 1355.3 Bond Yields 136Learning by Doing 5.2: Calculating the Yield-to-Maturity on a Bond 137Do You Understand? 1405.4 Important Bond Pricing Relationships 1405.5 Interest Rate Risk and Duration 144Learning by Doing 5.3: Calculating the Duration of a Bond 146People & Events: Betting the Farm on Interest Rates and Losing 155Do You Understand? 156Summary of Learning Objectives 156Key Terms 157Questions and Problems 157Chapter 6 The Structure of Interest Rates 159Chapter Preview 160Learning Objectives 1606.1 The Term Structure of Interest Rates 160Learning by Doing 6.1: Using the Term Structure Formula to Calculate Implied Forward Rates 165Do You Understand? 171People & Events: More on Forecasting Future Interest Rates 1726.2 Default Risk 1726.3 Tax Treatment 176People & Events: The Credit-Rating Club 177Do You Understand? 1806.4 Marketability 1806.5 Options on Debt Securities 1806.6 Behavior of Interest Rates over the Business Cycle 183Do You Understand? 185Summary of Learning Objectives 185Key Terms 186Questions and Problems 186Part III Financial Markets 189Chapter 7 Money Markets 191Chapter Preview 192Learning Objectives 1927.1 How the Money Markets Work 1927.2 Economic Role of the Money Markets 1937.3 Features of Money Market Instruments 1947.4 Treasury Bills 194Learning by Doing 7.1: Calculating the Discount Yield 199Learning by Doing 7.2: Calculating the Bond Equivalent Yield 199Do You Understand? 2007.5 Federal Agency Securities 2017.6 Federal Funds 2037.7 Other Major Money Market Instruments 205People & Events: Lehman Brothers' "Creative" Accounting: Repos 105 and 108 2077.8 Money Market Participants 2117.9 The Impact of the 2007-2008 Financial Crisis on the Money Markets 213People & Events: How Breaking the Buck (Almost) Broke the Commercial Paper Market 216Do You Understand? 217Summary of Learning Objectives 218Key Terms 219Questions and Problems 219Chapter 8 Bond Markets 220Chapter Preview 221Learning Objectives 2218.1 Functions of the Capital Markets 2218.2 The U.S. Government and Agency Securities 223People & Events: What Do Negative Yields on TIPS Tell Us? 226Do You Understand? 2278.3 State and Local Government Bonds 227People & Events: Build America Bonds Keep Municipal Finance Going During the Crisis 2328.4 Corporate Bonds 232Do You Understand? 2378.5 Financial Guarantees 2378.6 Securitized Credit Instruments 2388.7 Capital Market Regulators 2408.8 Bond Markets Around the World are Increasingly Linked 2418.9 The Impact of the 2007-2008 Financial Crisis on the Bond Markets 242Do You Understand? 244Summary of Learning Objectives 244Key Terms 245Questions and Problems 245Chapter 9 Mortgage Markets and Mortgage-Backed Securities 247Chapter Preview 248Learning Objectives 2489.1 The Unique Nature of Mortgage Markets 2499.2 Types of Mortgages 2499.3 Mortgage Qualifying 257Learning by Doing 9.1: Determining How Much Home You Can Buy 259Do You Understand? 2609.4 Mortgage-Backed Securities 2619.5 Mortgage Prepayment Risk and Other MBS 265Do You Understand? 2709.6 Participants in the Mortgage Markets 271People & Events: The Rise and Fall of Fannie and Freddie 273Do You Understand? 2749.7 Relationship Between Mortgage Markets and the Capital Markets 275Summary of Learning Objectives 276Key Terms 277Questions and Problems 278Chapter 10 Equity Markets 279Chapter Preview 280Learning Objectives 28010.1 What are Equity Securities? 28010.2 Equity Markets 282People & Events: The Retail Brokerage Industry 28710.3 Equity Trading 28710.4 Global Stock Markets 29110.5 Large-Scale and High Frequency Trading 292People & Events: High Speed Trading and the Demise of Knight Capital Group in 45 Minutes 29310.6 Regulation of Equity Markets 294Do You Understand? 29410.7 Stock Market Indexes 295People & Events: Circuit Breakers, Black Monday, and the Flash Crash 296Summary of Learning Objectives 297Key Terms 298Questions and Problems 299Chapter 11 Derivatives Markets 300Chapter Preview 301Learning Objectives 30111.1 The Nature of Derivative Securities 30111.2 Forward Markets 30211.3 Futures Markets 304Do You Understand? 31111.4 Uses of the Financial Futures Markets 311Learning by Doing 11.1: Hedging Risk in a Stock Portfolio 31311.5 Risks in the Futures Markets 318Do You Understand? 31911.6 Options Markets 319Do You Understand? 32511.7 Swap Markets 326People & Events: Swap Market Regulation 329Summary of Learning Objectives 330Key Terms 331Questions and Problems 331Chapter 12 International Markets 332Chapter Preview 333Learning Objectives 33312.1 The Difficulties of International Trade 33312.2 Exchange Rates 33412.3 Balance of Payments 33712.4 Foreign Exchange Markets 34112.5 Spot and Forward Transactions 343Learning by Doing 12.1: Using Forward Contracts to Hedge Exchange Rate Risks 343People & Events: The Big Mac Test of Purchasing Power Parity 34512.6 Capital Flows and Exchange Rates 346Do You Understand? 349People & Events: The Greek Crisis and Lessons for the U.S. 35012.7 Government Intervention in Foreign Exchange Markets 351Learning by Doing 12.2: Using Purchasing Power Parity to Determine the Expected Exchange Rate 35312.8 Financing International Trade 354Do You Understand? 35512.9 International Money and Capital Markets 35512.10 The Globalization of Financial Markets 358Summary of Learning Objectives 360Key Terms 360Questions and Problems 361Part IV Commercial Banking 363Chapter 13 Commercial Bank Operations 365Chapter Preview 366Learning Objectives 36613.1 An Overview of the Banking Industry 36613.2 Balance Sheet for a Commercial Bank 36913.3 The Source of Bank Funds 370Do You Understand? 37513.4 Bank Uses of Funds: Bank Investments and Cash Assets 37613.5 Bank Uses of Funds: Loans and Leases 37813.6 Loan Pricing 38113.7 Analysis of Loan Credit Risk 384People & Events: What's Your Score? 385Do You Understand? 38613.8 Fee-Based Services 38613.9 Off-Balance-Sheet Banking 387Do You Understand? 39113.10 Bank Earnings 39213.11 Bank Performance 396Do You Understand? 397Summary of Learning Objectives 398Key Terms 398Questions and Problems 399Chapter 14 International Banking 400Chapter Preview 401Learning Objectives 40114.1 Development of International Banking 40114.2 Regulation of Overseas Banking Activities 40414.3 Delivery of Overseas Banking Services 406Do You Understand? 40914.4 International Lending 409People & Events: The LIBOR Scandal 411Do You Understand? 41614.5 Foreign Banks in the United States 41614.6 Future Directions of International Banking 420Summary of Learning Objectives 420Key Terms 421Questions and Problems 421Chapter 15 Regulation of Financial Institutions 422Chapter Preview 423Learning Objectives 42315.1 Reasons for Regulation 42315.2 Bank Failures and Regulation 426People & Events: WaMu and the Destructive "Power of Yes" 43115.3 Safety and Soundness Regulation: Deposit Insurance 432Do You Understand? 43415.4 Deposit Insurance Issues 435Do You Understand? 43815.5 Safety and Soundness Regulation: Capital Requirements 439Do You Understand? 44715.6 Bank Examinations 44715.7 Structure and Competition Regulations 45015.8 Consumer Protection Regulations 452People & Events: Excerpts from "What are the FDIC's primary new responsibilities under the new law?" 45415.9 Bank Regulators 456Do You Understand? 458Summary of Learning Objectives 459Key Terms 459Questions and Problems 460Part V Financial Institutions 463Chapter 16 Thrift Institutions and Finance Companies 465Chapter Preview 466Learning Objectives 46616.1 Historical Development of Savings Institutions 46716.2 Operations of Savings Institutions 470Do You Understand? 47816.3 Credit Unions 478People & Events: Demographic Change Brings Opportunity 47916.4 Thrift Institutions Around the Globe 484People & Events: Commercial Banks Versus Credit Unions 485Do You Understand? 48616.5 Finance Companies 486People & Events: GE Divests Much of Its Finance Company Business 488Do You Understand? 494Summary of Learning Objectives 494Key Terms 495Questions and Problems 495Chapter 17 Insurance Companies and Pension Funds 496Chapter Preview 497Learning Objectives 49717.1 Insurance 497People & Events: 9/11 and Katrina: Insurance Coverage Disputes 49917.2 The Insurance Industry 501People & Events: The Rise, Fall, and Return of American International Group (AIG) 503Do You Understand? 50817.3 Life and Health Insurance Products 508Learning by Doing 17.1: Calculating Policyholders' Surplus 514Do You Understand? 51517.4 Property and Liability Insurance Products 515Learning by Doing 17.2: Measuring Insurance Company Profitability with the Combined Ratio 518Do You Understand? 51917.5 Pensions 519Do You Understand? 524Summary of Learning Objectives 524Key Terms 525Questions and Problems 526Chapter 18 Investment Banking 527Chapter Preview 528Learning Objectives 52818.1 The Relationship Between Commercial and Investment Banking 52818.2 Primary Services of an Investment Bank 533People & Events: Where, Oh, Where Have All the Investment Banks Gone? 534Do You Understand? 54318.3 Private Equity 543Learning by Doing 18.1: Evaluating a Venture Capital Investment 546Do You Understand? 548Summary of Learning Objectives 548Key Terms 549Questions and Problems 549Chapter 19 Investment Companies 551Chapter Preview 552Learning Objectives 55219.1 Investment Companies 55219.2 Open-End Mutual Funds 553Learning by Doing 19.1: Calculating Net Asset Value 554People & Events: Money Market Mutual Funds Breaking the Buck 56319.3 Closed-End Mutual Funds 56619.4 Exchange-Traded Funds 567Do You Understand? 57219.5 Hedge Funds 572People & Events: Hedge Funds and the Dodd-Frank Wall Street Reform and Consumer Protection Act 573Do You Understand? 57619.6 Real Estate Investment Trusts 576Summary of Learning Objectives 578Key Terms 579Questions and Problems 579Chapter 20 Risk Management in Financial Institutions 580Chapter Preview 581Learning Objectives 58120.1 The Dilemma: Profitability Versus Safety 58120.2 Liquidity Management 583Do You Understand? 586People & Events: Operational Risk 58720.3 Managing Credit Risk 587People & Events: Counterparty Controversy: AIG and Its Risky Risk Management 591Do You Understand? 59320.4 Measuring and Assessing Interest Rate Risk 59320.5 Hedging Interest Rate Risk 602Learning by Doing 20.1: Measuring Interest Rate Risk 608Do You Understand? 611Summary of Learning Objectives 611Key Terms 612Questions and Problems 612Glossary 613Index 637