Beruflich Dokumente
Kultur Dokumente
to accompany
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
Chapter 1
The Financial System
Websites: http://www.rba.gov.au http://www.asx.com.au http://www.ft.com/asia/
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
Learning Objectives
Explain the functions of a financial system Describe the main classes of financial
instruments issued in a financial system Distinguish between various types of financial markets according to function Discuss the flow of funds between savers and borrowers, including direct and intermediated finance
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
financial markets Categorise the main types of financial institutions Understand the impact of a financial crisis on a financial system and a real economy
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
Chapter Organisation
1.1 1.2 1.3 1.4 1.5 1.6 1.7 Introduction Functions of the Financial System Financial Instruments Financial Markets Impact of Globalisation Financial Institutions Summary
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
1.1 Introduction
Money Medium of exchange Allows specialisation in production Solves the divisibility problem, i.e. where medium of exchange does not represent equal value for the parties to the transaction Facilitates saving Store of wealth
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
Surplus units Savers of funds available for lending Deficit units Borrowers of funds for capital investment and consumption
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
10
Chapter Organisation
1.1 1.2 1.3 1.4 1.5 1.6 1.7 Introduction Functions of the Financial System Financial Instruments Financial Markets Impact of Globalisation Financial Institutions Summary
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
11
Total financial compensation received from an investment expressed as a percentage of the amount invested Probability that actual return on an investment will vary from the expected return
Risk
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
12
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
13
restructuring
The combination of assets and liabilities comprising the desired attributes of return, risk, liquidity and timing of cash flows
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
14
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
15
Chapter Organisation
1.1 1.2 1.3 1.4 1.5 1.6 1.7 Introduction Functions of the Financial System Financial Instruments Financial Markets Impact of Globalisation Financial Institutions Summary
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
16
Types
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
17
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
18
Financial security
Interest rate-sensitive debt instruments, currencies and equities
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
19
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
20
Chapter Organisation
1.1 1.2 1.3 1.4 1.5 1.6 1.7 Introduction Functions of the Financial System Financial Instruments Financial Markets Impact of Globalisation Financial Institutions Summary
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
21
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
22
Matching principle
Short-term assets should be funded with
short-term liabilities
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
23
Businesses
Company shares or debentures
Governments
Treasury notes or bonds
Individuals
Mortgage
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
24
No direct impact on original issuer of security Transfer of ownership from one saver to another saver Provides liquidity which facilitates restructuring of portfolios of security owners
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
25
Advantages
Avoids costs of intermediation Increases range of securities and markets
Disadvantages
Matching of preferences Liquidity and marketability of a security Search and transaction costs Assessment of risk, especially default risk
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
26
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
27
Advantages
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
28
Advantages (cont.)
Sectorial flow of funds The flow of funds between business, financial institutions, government and household sectors and the rest of the world Influenced by fiscal and monetary policy
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
29
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
30
Retail markets Transactions conducted primarily with financial intermediaries by the household and smallmedium business sectors
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
31
Money markets
Wholesale markets in which short-term
Term to maturity of one year or less Highly standardised form Deep secondary market
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
32
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
33
Banks Finance companies Funds managers Building societies Credit unions Companies
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
34
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
35
Capital markets
Markets in which longer-term securities are
Equity markets Corporate debt markets Government debt markets Foreign exchange markets Derivatives markets
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
36
Chapter Organisation
1.1 1.2 1.3 1.4 1.5 1.6 1.7 Introduction Functions of the Financial System Financial Instruments Financial Markets Impact of Globalisation Financial Institutions Summary
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
37
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
38
Chapter Organisation
1.1 1.2 1.3 1.4 1.5 1.6 1.7 Introduction Functions of the Financial System Financial Instruments Financial Markets Impact of Globalisation Financial Institutions Summary
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
39
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
40
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
41
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
42
transactions to corporations and government Advice on mergers and acquisitions, portfolio restructuring, finance and risk management Provide some funding
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
43
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
borrowers
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
45
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
47
Chapter Organisation
1.1 1.2 1.3 1.4 1.5 1.6 1.7 Introduction Functions of the Financial System Financial Instruments Financial Markets Impact of Globalisation Financial Institutions Summary
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
48
1.7 Summary
The financial system is composed of
financial institutions, instruments and markets facilitating transactions for goods and services and financial transactions
or hybrid
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
49
according to
Primary and secondary transactions Direct and intermediated flows Wholesale and retail markets Money markets and capital markets Financial institutions
Copyright 2003 McGraw-Hill Australia Pty Ltd PPTs t/a Copyright 2003 McGraw-Hill Australia Pty Ltd PPT Slides t/a Financial Institutions, Instruments andWillis Financial Accounting by Markets 4/e by Christopher Viney Slides prepared by Anthony Stanger Slides prepared by Kaye Watson
50