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A comprehensive set of vocabulary flashcards covering the financial system, its functions, components, markets, and institutions as discussed in the lecture.
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Financial System
An integrated network of markets, institutions, instruments and services that enables the transfer of funds from savers to borrowers.
Lender-Savers
Economic units (e.g., households) with surplus funds that supply capital to the financial system.
Borrower-Spenders
Economic units (e.g., firms, governments) with fund deficits that seek capital through the financial system.
Direct Finance
Flow of funds straight from lender-savers to borrower-spenders through financial markets without an intermediary.
Indirect Finance
Flow of funds from savers to borrowers via a financial intermediary such as a bank.
Financial Intermediary
Institution that channels funds between savers and borrowers while reducing risk and transaction costs.
Financial Market
Any marketplace in which financial assets (stocks, bonds, etc.) are issued and traded.
Payments Facilitation
Financial system function that enables smooth, convenient and timely transfer of money worldwide.
Transfer of Financial Resources
Function whereby surplus funds are allocated to deficit units, allowing investors to earn returns and borrowers to obtain capital.
Risk Management (Financial System)
Process of redistributing and mitigating unavoidable risks among individuals and firms via financial contracts and markets.
Financial Information Management
Provision of timely, relevant data that supports decisions by households, businesses and governments.
Efficient Financial Intermediation
Role of minimizing transaction costs by acting as a low-cost middleman between savers and borrowers.
Pooling of Resources
Combining many investors’ funds to finance larger projects and diversify risk.
Money
Anything widely accepted as a medium of exchange, unit of account and store of value.
Financial Institutions
Businesses engaged in monetary transactions such as deposits, loans, investments and currency exchange.
Financial Instruments
Tradable monetary contracts—including bonds and stocks—that transfer funds and risk.
Financial Services
Services that help investors manage assets and obtain risk protection (e.g., advisory, insurance).
Savings Utilization
Role of financial markets in channeling household and business savings into productive investments.
Price Determination of Securities
Function of financial markets in setting market prices for stocks, bonds and other instruments.
Asset Liquidity
Ability to quickly buy or sell financial assets in a marketplace without affecting their price significantly.
Transaction Cost Reduction
Benefit of financial markets that lower search, information and trading expenses for investors.
Stock Market
Market where ownership shares of public companies are issued and traded.
Bond Market
Market in which governments and companies raise funds by issuing debt securities to investors.
Commodities Market
Marketplace for buying and selling physical goods such as oil, gold, corn and meat.
Derivative Market
Market for contracts whose value is derived from the price of an underlying asset.
Debt Market
Segment where fixed-claim securities (e.g., bonds) that pay interest are bought and sold.
Equity Market
Segment in which stocks and other equity instruments that represent ownership are traded.
Money Market
Market for short-term (one year or less), low-risk financial instruments.
Capital Market
Market for medium- to long-term securities used to finance expansion and investment.
Primary Market
Market where new securities are issued and sold for the first time to raise fresh capital.
Secondary Market
Market where existing securities are traded among investors after the initial issuance.
Monetary Flow Control
Function of financial institutions in stabilizing money supply and managing inflation via asset transactions.
Banking and Financial Services
Savings accounts, checking, loans and other core services offered by financial institutions.
Insurance Services
Life, health and non-life coverage provided to protect individuals and firms against financial loss.
Capital Formation Assistance
Provision of external financing that enables businesses to expand their stock of productive assets.
Investment Advice
Guidance offered by institutions to help clients choose optimal investments in financial markets.
Financial Brokerage
Intermediation service that matches buyers and sellers of securities for a brokerage fee.
Resource Flow Facilitation
Smooth transfer of large sums (e.g., for investments or property purchases) enabled by institutions.
Institutional Risk Management
Pooling of risks among many clients so individual exposure to uncertainty is reduced.
Commercial Bank
Depository institution that accepts deposits and extends business, personal and mortgage loans.
Credit Union
Member-owned cooperative that accepts savings and provides loans to its participants.
Savings and Loan Association
Institution that gathers small savers’ deposits and primarily finances home purchases.
Mutual Savings Bank
Depository institution owned by its depositors; profits benefit members via better rates or lower fees.
Insurance Company
Non-depository institution that offers risk protection and invests collected premiums.
Pension/Provident Fund
Fund that collects periodic contributions and pays retirement benefits to employees.
Finance Company
Firm that provides consumer and business loans for homes, projects, leasing and real estate.
Mutual Fund
Institution that pools investors’ money to buy a diversified portfolio of securities.
Investment Bank
Specialist firm that underwrites securities, arranges IPOs and provides corporate finance services.