Money and Banking Lecture 1

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Definition of a Bond
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Terms in this set (22)
Financial IntermediariesLink investors (savers) to borrowers by transforming assetsMarket FacilitatorsInvestment Banks, Brokers, DealersInvestment Banksissue securities for corporationsBrokerslink sellers to buyers of securities in exchange for a feeDealersmake a market by buying and selling securitiesTypes of Financial intermediariesDepository Institutions, Contractual Savings Institution, Investment IntermediariesForeign Bondssold in a foreign country and denominated in that country's currencyEuro Bondsa bond denominated in a currency other than that of the country in which it is soldEuro DollarsU.S. dollars deposited in foreign banks outside of the U.S. or in foreign branches of U.S. banksAsymmetric Informationthe unequal knowledge that each party to a transaction has about the other partyAdverse Selectionthe problem created by asymmetric information prior to a financial transaction: The party that is the most undesirable from the other party's point of view is the one who is most likely to want to engage in the financial transactionMoral Hazardthe risk that one party to a transaction will engage in behavior that is undesirable from the other party's point of view