FIN 701 Chapter Notes - Chapter 1: Farm Credit Canada, Wire Transfer, Electronic Trading
18 Sep 2013
School
Department
Course
Professor
Document Summary
Financial institutions divided into four pillars: chartered banks, trust companies, insurance companies, and investment dealers. Universal bank: fi that is permitted by regulators to offer a full range of financial services. Fis perform essential function of channelling surplus funds (suppliers of funds) to shortage funds (users of funds) Fis exposed to liability withdrawal, liquidity risk, underwriting risk, and operating cost risk. Information costs collect information about customers (such as corporations) and to monitor their actions due to relatively large size funds. Fis reduce monitoring costs, liquidity costs, and price risk to increase preference of holding financial claims. Fis purchase primary securities (equities, bonds, and other debt claims) issued by corporations and sell in the form of deposits, insurance policies, and so on. Financial claims on fis may be considered secondary securities because assets are baked by primary securities issued by commercial corporations that in turn invest in real assets.
