Markets and Institutions 1

Flashcards to help students understand key concepts related to financial markets and institutions.

Financial Market

A place where investors can exchange securities.

Security

A tradable claim to future income generated by real assets, such as lands, buildings, and knowledge.

Stock Market

A marketplace for buying and selling stocks (equities).

Bond Market

A marketplace for buying and selling debt securities, primarily bonds.

Liquidity

The ease with which an asset can be converted into cash without affecting its market price.

Intermediaries

Entities, such as banks and brokers, that act as middlemen between investors and the securities markets.

Consumption Smoothing

The economic principle that reflects people's preference to stabilize their consumption over time.

Risk Sharing

The practice of diversifying investments to distribute and manage risk among multiple participants.

Agency Problems

Conflicts of interest where the goals of the owner and manager diverge, often leading to inefficiencies.

Asynchronous Material

Educational materials that are accessible at any time, allowing students to learn at their own pace.

Primary Market

The part of the capital market that deals with the issuance of new securities.

Secondary Market

The market where previously issued financial instruments, such as stock and bonds, are bought and sold.

Financial Crises

Periods of extreme financial instability that often lead to sudden declines in asset prices and financial market disruptions.