Notes FMI Lecture 1-3

Fiat Money

Money that a government declares to be legal tender and must be accepted as payment.

Fiduciary Money

Money that gains value through public trust in its acceptability as a medium of exchange.

Commercial Bank Money

Claims against financial institutions used to purchase goods or services, convertible to fiat or central bank money.

Central Bank Money

Money constituting a direct claim on the assets of the Central Bank, including coins and bills.

Electronic Money

An electronic store of monetary value used for payments, not necessarily linked to bank accounts.

M1

The money supply in a narrow sense, including currency in circulation and overnight deposits.

M2

Financial assets not immediately redeemable but considered available purchasing power, often termed near money.

M3

The broadest definition of money, including all financial assets held outside the banking system.

Base Money

All liabilities the monetary authorities hold towards banks and the general public.

Reserve Coefficient

The ratio of reserves a bank holds against its deposits, influenced by interest rates and alternative financing costs.

Investment Bank

Institutions performing a range of financial operations, including venture capital and issuing securities.

Venture Capitalists

Investors who provide capital to startups in exchange for equity, often providing management assistance.

Holdings

Companies whose purpose is to buy other companies and generate cash flows for dividends.

Shadow Banks

Institutions performing credit intermediation without a banking license, operating outside traditional banking regulations.

External Financing

Matching agents who wish to spend more than they earn with those who save and hold a financial surplus.

Bank Intermediation

Banks attract deposits and grant loans, absorbing the risk if loans are not repaid.

Covenants

Clauses in loan agreements that limit borrower actions to protect the lender's interests.

Leasing

An alternative to loans where the lessor makes a good available to the lessee for compensation.

Factoring

Service of collecting invoices for a corporation, allowing immediate cash flow and reducing non-payment risk.