Financial Markets and Institutions (8th Edition) PDF
Preview Financial Markets and Institutions (8th Edition)
Financial Markets and Institutions E i g h t h E d i t i o n The Pearson Series in Finance Bekaert/Hodrick Frasca Marthinsen International Financial Management Personal Finance Risk Takers: Uses and Abuses of Financial Derivatives Berk/DeMarzo Gitman/Zutter Corporate Finance* Principles of Managerial Finance* McDonald Corporate Finance: The Core* Principles of Managerial Finance––Brief Derivatives Markets Edition* Fundamentals of Derivatives Markets Berk/DeMarzo/Harford Fundamentals of Corporate Finance* Haugen Mishkin/Eakins Brooks The Inefficient Stock Market: What Pays Financial Markets and Institutions Off and Why Financial Management: Core Concepts* The New Finance: Overreaction, Moffett/Stonehill/Eiteman Copeland/Weston/Shastri Complexity, and Uniqueness Fundamentals of Multinational Finance Financial Theory and Corporate Policy Holden Nofsinger Dorfman/Cather Excel Modeling in Corporate Finance Psychology of Investing Introduction to Risk Management and Excel Modeling in Investments Insurance Pennacchi Hughes/MacDonald Theory of Asset Pricing Eakins/McNally International Banking: Text Corporate Finance Online* and Cases Rejda Eiteman/Stonehill/Moffett Principles of Risk Management and Multinational Business Finance Hull Insurance Fundamentals of Futures and Options Fabozzi Markets Smart/Gitman/Joehnk Bond Markets: Analysis and Strategies Options, Futures, and Other Fundamentals of Investing* Derivatives Fabozzi/Modigliani Solnik/McLeavey Capital Markets: Institutions and Keown Global Investments Instruments Personal Finance: Turning Money into Wealth* Titman/Keown/Martin Fabozzi/Modigliani/Jones Financial Management: Principles and Foundations of Financial Markets and Keown/Martin/Petty Applications* Institutions Foundations of Finance: The Logic and Finkler Practice of Financial Management* Titman/Martin Financial Management for Public, Health, Valuation: The Art and Science of and Not-for-Profit Organizations Kim/Nofsinger Corporate Investment Decisions Corporate Governance Foerster Weston/Mitchel/Mulherin Madura Financial Management: Concepts and Takeovers, Restructuring, and Corporate Personal Finance* Applications* Governance *denotes MyFinanceLab titles Log onto www.myfinancelab.com to learn more. Financial Markets and Institutions E i g h t h E d i t i o n Frederic S. Mishkin Graduate School of Business, Columbia University Stanley G. Eakins East Carolina University Boston Columbus Indianapolis New York San Francisco Upper Saddle River Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montréal Toronto Delhi Mexico City São Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo Editor in Chief: Donna Battista Cover Art: © Pavalena/Shutterstock; Chungking/ Executive Acquisitions Editor: Adrienne Shutterstock; Petronilo G. Dangoy, Jr./ D’Ambrosio Shutterstock; Martin Preston/Shutterstock; M. B. Acquisitions Editor: Christina Masturzo Birdy/E+/Getty Images Editorial Project Manager: Erin McDonagh Senior Media Producer: Melissa Honig Editorial Assistant: Elissa Senra-Sargent Permissions Associate Project Manager: Samantha Executive Marketing Manager: Lori DeShazo Graham Managing Editor: Jeff Holcomb Full-Service Project Management, Composition, and Production Project Manager: Alison Eusden Interior Design: Cenveo® Publisher Services Operations Specialist: Carol Melville Printer/Binder: R.R. Donnelly/Willard Art Director: Jonathan Boylan Cover Printer: Lehigh-Phoenix Cover Designer: Jonathan Boylan Color/Hagerstown Text Font : ITC Century Std Credits and acknowledgments borrowed from other sources and reproduced, with permission, in this text- book appear on the appropriate page within text. Microsoft and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published as part of the services for any purpose. All such documents and related graphics are provided “as is” without warranty of any kind. Microsoft and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all warranties and conditions of merchantability, whether express, implied or statutory, fitness for a particular purpose, title and non-infringement. In no event shall Microsoft and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from the services. 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This page intentionally left blank Contents in Brief Contents in Detail ix Contents on the Web xxvii Preface xxxi About the Authors xxxix part onE IntroductIon 1 1 Why Study Financial Markets and Institutions? 1 2 Overview of the Financial System 15 part two FundaMEntalS oF FInancIal MarkEtS 36 3 What Do Interest Rates Mean and What Is Their Role in Valuation? 36 4 Why Do Interest Rates Change? 64 5 How Do Risk and Term Structure Affect Interest Rates? 87 6 Are Financial Markets Efficient? 115 part thrEE FundaMEntalS oF FInancIal InStItutIonS 133 7 Why Do Financial Institutions Exist? 133 8 Why Do Financial Crises Occur and Why Are They So Damaging to the Economy? 164 part Four cEntral BankInG and thE conduct oF MonEtary polIcy 183 9 Central Banks and the Federal Reserve System 183 10 Conduct of Monetary Policy: Tools, Goals, Strategy, and Tactics 206 part FIvE FInancIal MarkEtS 250 11 The Money Markets 250 12 The Bond Market 273 13 The Stock Market 297 14 The Mortgage Markets 318 15 The Foreign Exchange Market 339 16 The International Financial System 367 part SIx thE FInancIal InStItutIonS InduStry 391 17 Banking and the Management of Financial Institutions 391 18 Financial Regulation 418 19 Banking Industry: Structure and Competition 448 20 The Mutual Fund Industry 483 21 Insurance Companies and Pension Funds 508 22 Investment Banks, Security Brokers and Dealers, and Venture Capital Firms 538 vii viii Contents in Brief part SEvEn thE ManaGEMEnt oF FInancIal InStItutIonS 562 23 Risk Management in Financial Institutions 562 24 Hedging with Financial Derivatives 583 Glossary g-1 Index i-1 chaptErS on thE wEB 25 Financial Crises in Emerging Market Economies W-1 26 Savings Associations and Credit Unions W-22 27 Finance Companies W-48 Contents in Detail Contents on the Web xxvii Preface xxxi About the Authors xxxix part onE IntroductIon Chapter 1 Why Study Financial Markets and Institutions? 1 PrEviEW 1 Why Study Financial Markets? 2 Debt Markets and Interest Rates 2 The Stock Market 3 The Foreign Exchange Market 5 Why Study Financial Institutions? 6 Structure of the Financial System 6 Financial Crises 6 Central Banks and the Conduct of Monetary Policy 7 The International Financial System 7 Banks and Other Financial Institutions 7 Financial Innovation 7 Managing Risk in Financial Institutions 8 Applied Managerial Perspective 8 How We Will Study Financial Markets and Institutions 9 Exploring the Web 9 Collecting and Graphing Data 10 Web Exercise 10 Concluding Remarks 12 SuMMary 12 kEy tErMS 13 QuEStIonS 13 QuantItatIvE proBlEMS 13 wEB ExErcISES 14 Chapter 2 Overview of the Financial System 15 PrEviEW 15 Function of Financial Markets 16 Structure of Financial Markets 18 Debt and Equity Markets 18 Primary and Secondary Markets 18 Exchanges and Over-the-Counter Markets 19 Money and Capital Markets 20 ix
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