Dr. Susan D. Jordan Finance 650 Investments Spring 1999

Chapter 1 Investment Environment Finance 650 Spring 1999

Investments & Financial Assets Essential nature of investment Real Assets –assets used to produce goods and services Financial Assets –claims on real assets

Investments & Financial Assets Financial Assets –Money Market –Capital Market –Derivative or Contingent Claims Markets

Financial Markets and the Economy Consumption timing Allocation of risk Separation of ownership & management

How the financial system meets the needs of participants Financial intermediation –pool resources –diversify –expertise and/or economies of scale Investment banking Financial innovation and derivatives –primitive –derivative Responding to regulation and taxes

Markets and market structure Direct search markets Brokered markets Dealer markets –Spreads –OTC Auction markets Primary vs secondary markets

Investments and Innovation Technology and Delivery of Service Globalization International and Global Markets Continue Developing Securitization & Credit Enhancement Repackaging Services of Financial Intermediaries