ECN 506 Lecture Notes - Lecture 2: Life Insurance, Toronto Stock Exchange, Eurodollar
28 Mar 2018
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Document Summary
Week 2- development of the canadian banking and financial system. Allows consumers to time their purchases: the channeling of funds an be: Borrow funds directly from lenders in financial markets. Involves selling securities (financial instruments), which are claims on the borrower"s future income. Securities are assets for the person who buys them and a liability (iou or debt) for the individual or firm that sells them. Financial intermediaries are involved in the transactions. *** see slide 4 for flows of funds through the financial system. Primary route to move funds from lenders to borrowers. Borrower and lender have different information about the returns and risk associated with the investment projects. Lack of information can be before or after the transactions: adverse selection: is the problem created by asymmetric information before the transaction occurs. Types of financial intermediaries: depository institutions chartered banks, trusts and mortgage loan. Companies, credit unions and caisses populaires: contractual savings institutions life insurance companies, property and.
