2016/9/8 Financial Market Participants Instruments, Institutions and Variables in the financial Markets Everyone can be a participant in the financial market Central bank, treasur What does each of the following do in the financia Commercial banks, investment banks, security Households firms, insurance companies, mutual funds Business units Benchmark interest rate, required reserve Central and local governments ratio, capital adequacy ratio, interest rate Government agencies Stock exchange, stocks, warrants, ETF nationa Commercial Paper, Bonds, T-bonds, T-bills Regulators convertibles, Repo Options, futures, swap forward, NDF Globalization of financial Markets Classification of Global Financial Markets Since 1970s the financial markets have ecome more and more integrated Market Deregulation or liberalization of financial also called national markets market) Technological advances Increased institutionalization What are the benefits and costs of financial Domestic I Foreign Market markets becoming global and integrated? Classification of Global Financial Markets The Chinese Characteristics Examples For chinese financial markets McDonald's issues uS dollar bond in the us Are financial markets all the same over the world? McDonald s issues Japanese Yen bond in Japan Are there any"types" of financial markets? In 2005, IFC and ADB issued RMb bond in Chinas Are Chinas financial markets special? Why or why inter-bank market In 2010, McDonalds issues RMB bond in Hong How did the china' s financial markets evolve in the transition from a planned economy to the What's the purpose of financing in the foreign market economy? market and Euromarket? How do we predict the future? 52016/9/8 5 Financial Market Participants • Everyone can be a participant in the financial market. • What does each of the following do in the financial markets? – Households – Business units – Central and local governments – Government agencies – Supranationals – Regulators 1-25 Instruments, Institutions and Variables in the Financial Markets • Central bank, treasury • Commercial banks, investment banks, security firms, insurance companies, mutual funds • Benchmark interest rate, required reserve ratio, capital adequacy ratio, interest rate • Stock exchange, stocks, warrants, ETF • Commercial Paper, Bonds, T‐bonds, T‐bills, convertibles, Repo • Options, futures, swap, forward, NDF 0-26 Globalization of Financial Markets • Since 1970s, the financial markets have become more and more integrated –Deregulation or liberalization of financial markets – Technological advances – Increased institutionalization • What are the benefits and costs of financial markets becoming global and integrated? 0-27 Classification of Global Financial Markets Internal Market (also called national market) External Market (also called international market, offshore market, and Euromarket) Domestic Market Foreign Market 0-28 Classification of Global Financial Markets • Examples – McDonald’s issues US dollar bond in the US. – McDonald’s issues Japanese Yen bond in Japan. – In 2005, IFC and ADB issued RMB bond in China’s inter‐bank market. – In 2010, McDonald’s issues RMB bond in Hong Kong. • What’s the purpose of financing in the foreign market and Euromarket? 0-29 The Chinese Characteristics • For Chinese Financial Markets – Are financial markets all the same over the world? – Are there any “types” of financial markets? – Are China’s financial markets special? Why or why not? – How did the China’s financial markets evolve in the transition from a planned economy to the market economy? – How do we predict the future? 0-30