Föreläsning 1 del 2

Question 1

Vad gör Financial intermediaries FI på marknaden?

Answer 1

• De reducerar transaction costs by leveraging on economies of scale.
• De reducerar exposure to risk by asset transformation. They create assets with low risk and use the proceeds from it to buy assets with higher risk.
• FI reduce information costs. There is asymmetric information in financial transactions.

Question 2

Vad är Depository institutions?

Answer 2

Accept deposits from individuals and make loans.

Question 3

Vad är Contractual savings institutions?

Answer 3

Their primary source of funds are premiums/contributions that people pay periodically on a contractual basis. Liquidity of assets is less of a concern since they can predict how much they will pay out in benefits.

Question 4

Vad är Investment intermediaries?

Answer 4

Deras Primary source of funds is shares that they sell to individuals. Invested in well diversified portfolios of securities.

Question 5

Varför är Financial system heavily regulated?

Answer 5

To increase information available to investors. Reduce information asymmetry problems.

Question 6

Vad kan Information asymmetry leda till?

Answer 6

Financial panic where investors want to pull out their investments.