2. Financial System and Markets

mortgage

loan backed by real property in the form of buildings and houses

commercial banks

depository institutions that accept deposits, issue check-writing accounts, and make loans

savings banks

accept the savings of individuals and lend pooled savings to individuals primarily in the form of mortgage loans

credit unions

cooperative, nonprofi t organizations that exist primarily to provide member depositors with consumer credit

central bank

federal government agency that facilitates the operation of the financial system and regulates the money supply

open-market operations

buying and selling of securities by the Federal Reserve to alter the supply of money

financial system

the system that allows the exchange between the lenders, borrowers and investors.

financial assets

one that is used for production or consumption for further creation of assets. There are 2 types: marketable and non-marketable assets

marketable assets

assets which can be easily transferred from one person to another without much constraints

non-marketable assets

the ones that cannot be transferred easily

financial market

market where entities can trade financial securities, commodities at low transaction costs and at prices that reflect supply and demans

capital market

used to designate activities in long term credit

money market

trading of short-term assets

Treasury bills

short-term money market instrument, issued by the central bank on behalf of the government

treasury bills market

market for treasury bills which have “short-term” maturity

financial instruments

a document that has a monetary value or represents a legally enforceable agreement between 2 or more parties regarding a right to payment of money

Capital market instruments

shares, debentures, bonds

money market instruments

T-bills, certificates of deposits, commercial papers, repurchase agreements, banker’s acceptance