chap001金融机构习题解答.docx

chap001金融机构习题解答.docx

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chap001金融机构习题解答

ChapterOne

WhyAreFinancialIntermediariesSpecial

ChapterOutline

Introduction

FinancialIntermediaries'SpeciaIness

InformationCosts

LiquidityandPriceRisk

OtherSpecialServices

OtherAspectsofSpeciaIness

TheTransmissionofMonetaryPolicy

CreditAllocation

IntergenerationalWealthTransfersorTimeIntermediationPaymentServices

DenominationIntermediation

SpeciaInessandRegulation

SafetyandSoundnessRegulation

MonetaryPolicyRegulation

CreditAllocationRegulation

ConsumerProtectionRegulation

InvestorProtectionRegulation

EntryRegulation

TheChangingDynamicsofSpeciaIness

TrendsintheUnitedStates

FutureTrends

GlobalIssues

Summary

SolutionsforEnd-of-ChapterQuestionsandProblems:

ChapterOne

1.Identifyandbrieflyexplainthefiveriskscommontofinancialinstitutions.

Defaultorcreditriskofassets,interestrateriskcausedbymaturitymismatchesbetweenassetsandliabilities,liabilitywithdrawalorliquidityrisk,underwritingrisk,andoperatingcostrisks.

2.Explainhoweconomictransactionsbetweenhouseholdsaversoffundsandcorporateusersoffundswouldoccurinaworldwithoutfinancial

intermediaries（FIs）.

InaworldwithoutFIstheusersofcorporatefundsintheeconomywouldhavetoapproachdirectlythehouseholdsaversoffundsinordertosatisfytheirborrowingneeds.Thisprocesswouldbeextremelycostlybecauseoftheupfrontinformationcostsfacedbypotentiallenders.Costinefficiencieswouldarisewiththeidentificationofpotentialborrowers,thepoolingofsmallsavingsintoloansofsufficientsizetofinancecorporateactivities,andtheassessmentofriskandinvestmentopportunities.Moreover,lenderswouldhavetomonitortheactivitiesofborrowersovereachloan'slifespan.Thenetresultwouldbeanimperfectallocationofresourcesinaneconomy.

3.Identifyandexplainthreeeconomicdisincentivesthatprobablywoulddampentheflowoffundsbetweenhouseholdsaversoffundsandcorporateusersoffundsinaneconomicworldwithoutfinancialintermediaries.

Investorsgenerallyareaversetopurchasingsecuritiesdirectlybecauseof（a）monitoringcosts,（b）liquiditycosts,and（c）pricerisk.Monitoringtheactivitiesofborrowersrequiresextensivetime,expense,andexpertise.Asaresult,householdswouldprefertoleavethisactivitytoothers,andbydefinition,theresultinglackofmonitoringwouldincreasetheriskinessofinvestingincorporatedebtandequitymarkets.Thelong-termnatureofcorporateequityanddebtwouldlikelyeliminateatleastaportionofthosehouseholdswillingtolendmoney,asthepreferenceofmanyfornear-cashliquiditywoulddominatetheextrareturnswhichmaybeavailable.Third,thepriceriskoftransactionsonthesecondarymarketswouldincreasewithouttheinformationflowsandservicesgeneratedbyhighvolume.

4.IdentifyandexplainthetwofunctionsinwhichFIsmayspecializethatenablethesmoothflowoffundsfromhouseholdsaverstocorporateusers.

FIsserveasconduitsbetweenusersandsaversoffundsbyprovidingabrokeragefunctionandbyengagingintheassettransformationfunction.Thebrokeragefunctioncanbenefitbothsaversandusersoffundsandcanvaryaccordingtothefirm.FIsmayprovideonlytransactionservices,suchasdiscountbrokerages,ortheyalsomayofferadvisoryserviceswhichhelpreduceinformationcosts,suchasfull-linefirmslikeMerrillLynch.Theassettransformationfunctionisaccomplishedbyissuingtheirownsecurities,suchasdepositsandinsurancepoliciesthataremoreattractivetohouseholdsavers,andusingtheproceedstopurchasetheprimarysecuritiesofcorporations.Thus,FIstakeonthecostsassociatedwiththepurchaseofsecurities.

5.InwhatsensearethefinancialclaimsofFIsconsideredsecondary

securities,whilethefinancialclaimsofcommercialcorporationsareconsideredprimarysecuritiesHowdoesthetransformationprocess,or

intermediation,reducetherisk,oreconomicdisincentives,tothesavers

Thefundsraisedbythefinancialclaimsissuedbycommercialcorporationsareusedtoinvestinrealassets.Thesefinancialclaims,whichareconsideredprimarysecurities,arepurchasedbyFIswhosefinancialclaimsthereforeareconsideredsecondarysecurities.SaverswhoinvestinthefinancialclaimsofFIsareindirectlyinvestingintheprimarysecuritiesofcommercialcorporations.However,theinformationgatheringandevaluationexpenses,monitoringexpenses,liquiditycosts,andpriceriskofplacingtheinvestmentsdirectlywiththecommercialcorporationarereducedbecauseoftheefficienciesoftheFI.

6.Explainhowfinancialinstitutionsactasdelegatedmonitors.Whatsecondarybenefitsoftenaccruetotheentirefinancialsystembecauseofthismonitoringprocess

Byputtingexcessfunds