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Learning goals
Define Finance and the Financial System
Understand the relationship between
Indicative aim
Link theory with the real world.
Money = Happiness?
10
11
12
Securities
FINANCIAL MARKETS
-Money and Capital
markets
-OTC, Stock- exchanges
Funds
LENDERS
Funds
-HOUSEHOLDS
priv.placement
-Government
?
Deposits
Funds
Funds
BORROWERS
-COMPANIES
-Government
-Municipalities
Loans
FINANCIAL
INSTITUTIONS
-Commercial
banks,Investment banks,
Funds
Mutual funds,Leasing
comp.,etc.
Vallyon Andrea 2010
13
Investment decision
All there is to investing is picking good
14
Money evolution
I. Direct interchange of commodities (barter trade)
II. The general equivalents (salt, slaves etc.)
15
Criteria of money
Physical essentials:
Cheap to produce
Homogeneously equal
Highly divisible
Convenient to carry
Universally acceptable
Stability in value
16
17
18
19
Era of metals
Monometallism
Bimetallism
Greshams axiom. The good money was
20
Money substitutes
Growing
turnover
Need to
increase
rotation
Appearance
of
substitutes
21
Money substitutes 2
Acceptability
Discounting papers
Commercial papers, trade bills
(kereskedelmi vlt)
Today e-money
22
Pyramid shape
analysis
company
Fundemental analysis
Economic variables
and the exchange rate
country
world economy
Q?
Vallyon Andrea 2010
23
Participants
bearish and bullish
traders and
speculators
24
25
Market terminologies
Secondary and primary
Money and bond market,
domestic and international
markets
Wholesale and retail
market
Open and closed ( open
offer for sale and private
placing
Claim for the interest
(Bearer and registered
securities)
26
Money market
Short term instruments
Pure discount securities
Contracts up to 1 year
27
Financial instruments
Money market instruments
28
Financial instruments
Other possibilities
Call money
Interbank market
Repurchase agreement /repo/
- Time deposit
29
Call money
Call money
Term: very short period of time
Overnight(12p.m-12p.m. next day)
3 or 7 days notice
Negotiable: no
Money is lent by one bank to another
and may be called back anytime
30
T-bills
31
32
33
Capital market
Instruments
Bonds
Government bonds
Local authority papers
Mortgage or other assets backed bonds
Corporate
Foreign
Junk
Shares
Preferred
Normal
Innovations
Convertibles
Variables
Investment notes
Vallyon Andrea 2010
34
35