Financial intermediaries

Financial intermediaries

institutions or entities that act as intermediaries between savers and borrowers in the financial system

Risk sharing

a practice where individuals or entities spread or distribute financial risk among themselves

Economies of scope

the cost advantages that a business can achieve by producing a variety of goods or services rather than specializing in just one

Depository institutions

financial institutions that accept and manage deposits from individuals and businesses

Commercial Banks

These financial intermediaries raise funds primarily by issuing checkable deposits, savings deposits, and time deposits

Savings and Loan Associations

financial institutions that traditionally focused on accepting savings deposits and providing mortgage loans

Credit Unions

Typically very small cooperative lending institutions organized around a particular group

Contractual savings institutions

financial intermediaries that acquire funds at periodic intervals on a contractual basis

Life insurance companies

insure people against financial hazards following a death and sell annuities

Fire and casualty insurance companies

insure their policyholders against loss from theft, fire, and accidents.

Mutual Funds

These financial intermediaries acquire funds by selling shares to many individuals and use the proceeds to purchase diversified portfolios of stocks and bonds.

Finance companies

raise funds by selling commercial paper and by issuing stocks and bonds. They lend these funds to consumers (who make purchases of such items as furniture, automobiles, and home improvements) and to small businesses.

transaction

Mutual funds allow shareholders to pool their resources so that they can take advantage of lower ___________ costs when buying large blocks of stocks or bonds.

Money Market Mutual Funds

These financial institutions have the characteristics of a mutual fund but also function to some extent as a depository institution because they offer deposit-type accounts

Hedge funds

A type of mutual fund that is organised as limited partnerships with minimum investments ranging from $100,000 to, more typically, $1 million or more

Investment banks

a financial intermediary that helps a corporation issue securities. First it advises the corporation on which type of securities to issue; then it helps sell the securities by purchasing them from the corporation at a predetermined price and reselling them in the market.