Thẻ ghi nhớ: [ESP233] Unit 7: Financial Institutions | Quizlet

Financial intermediation

the process of transferring sums of money from economic agents with surplus funds to economic agents that would like to utilize those funds

Financial intermediary

A financial firm, such as a bank, that borrows funds from savers and lends them to borrowers

Mortgage

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

Mortgage-backed security

debt security created by pooling together a group of mortgage loans

Depository institutions

the institutions accept deposits from individuals and then lend pooled deposits to firms, governments, and individuals

Securities firms

financial institutions that faciliate financial market trades between buyers and sellers for a fee.

Contractual savings organizations

savings institutions that obtain funds through long-term contractual arrangements and invest these funds on the capital markets

Brokerage firms

assist individuals to purchase new or existing securities issues or to sell previously purchased securities

Finance companies

organizations that make loans to individuals and businesses.

Commercial banks

A financial firm that serves as a financial intermediary by taking in deposits and using them to make loans.

Thrift institutions

depository institutions that specialize in taking deposits and make home mortgages (tổ chức tiết kiệm)

Savings banks

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

Savings and loan associations (S&Ls)

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

Credit unions

Non-profit cooperative financial institution that provides credit to its members

Investment companies

sell shares in their firms to individuals and others and invest the pooled proceeds in corporate and government securities

Mutual funds

open-end investment companies that can issue an unlimited number of their shares to their investors and use the pooled proceeds to purchase corporate and government securities

Investment Banks

sell or market new securities issued by businesses to individual and institutional investors

Financial Services

a broad range of more specific activities such as banking, investing, and insurance. Financial services are limited to the activity of financial services firms and their professionals while financial products are the actual goods, accounts, or investments they provide.

Bank risk management

is important for a bank to ensure its profitability and soundness. It is also a concern of regulators to maintain the safety and soundness of the financial system. Bank risk management has become the major concern of banking regulators and policy makers.

financial intermediaries

financial institutions that acquire funds issuing liabilities, and in turn, use those funds to acquire assets by pursuing securities or loans

economies of scale

the reduction in transaction costs per dollar of transactions as the size (or scale) of transactions increases

financial intermediation

the primary route for moving funds from lenders to borrowers

transaction costs

the time and money spent in carrying out financial transactions

liquidity services

services that make it easier for customers to conduct transactions

depository institutions

financial intermediaries that accept deposits from individuals and institutions and make loans

thrift institutions (thrifts)

savings and loan associations, mutual savings banks, and credit unions

financial panic

the widespread collapse of financial intermediaries

credit risk

the risk arising because borrowers may default

interest-rate risk

the riskiness of earnings and returns on bank assets caused by interest-rate changes

Conflict of interest

a type of moral hazard problem (rủi ro đạo đức), arise when a person or institution has multiple objectives (interests), some of which conflict with each other

moral hazard

the problem created by asymmetric information after the transaction occurs

adverse selection

the problem created by asymmetric information before the transaction occurs (lựa chọn đối nghịch)

annuities

annual income payments upon retirement

Commercial paper

a short-term debt instrument issued by large banks and well-known corporations

transaction costs

the time and money spent in carrying out financial transactions

risk

uncertainty about the returns investors will earn on assets

asset transformation

This process of risk sharing

Depository institutions

financial intermediaries that accept deposits from individuals and institutions and make loans

Asymmetric Information

a situation in which one party to an economic transaction has less information than the other party

Adverse Selection

occurs when the potential borrowers who are the most likely to produce an undesirable (adverse) outcome—the bad credit risks—are the ones who most actively seek out a loan and are thus most likely to be selected.

Lemons Problem

a particular aspect of the way the adverse selection problem interferes with the efficient functioning of the market

free rider problem

The problem faced by unions and other groups when people do not join because they can benefit from the group's activities without officially joining. The bigger the group, the more serious the problem.

collateral

A property promised to the lender if the borrower defaults

Net Worth

(also called equity capital) the difference between assets and liabilities

life insurance companies

insure people against financial hazards following a death and sell annuities (annual income payments upon retirement)

Fire and Casualty Insurance Companie

Financial intermediaries that protect policyholders against financial losses from risks like theft, fire, and accidents.

Pension Funds and Government Retirement Funds

Institutions that provide retirement income (annuities) to covered employees upon retirement.

money market mutual funds

a mutual fund that pools funds from many investors and uses these funds to purchase very safe, highly liquid securities

hedge funds

A special type of mutual fund organized as limited partnerships with high minimum investments (from $100,000 to over $1 million).