Financial Markets and Institutions (2-downloads)

Journal, 318

Market timing, 508

Market traders, 306

Market value, 61

Mark-to-market accounting, 436, 437

Marsh & McLennan Cos. (MMC), 526

I-14

Index

---

Martin, William McChesney, Jr., 197n,

200, 203n

MasterCharge (MasterCard), 459

Matched sale-purchase transactions

(reverse repos), 226

Mattel, 550

Maturity, 18, 296t

Maturity bucket approach, 575

Maturity date, 37

Maximum acceptable prices, 553

McCain, John, 443n

McCarran-Ferguson Act 1945, 525–26f

McFadden Act of 1927, 441t, 474

McKinney, Stewart, 429

Mean-reversing interest rates, 102n

Mean reversion, 126

Medicaid, 522

Medicare, 522

Meltzer, Alan, 393

Merchant banks, 185–86

Mergers

of banks, 476

defined, 551

failed banks and, 426–27

investment banks and, 551–52

Mergers and acquisitions market, 551–52

Merrill Lynch, 159, 177, 260, 284, 467, 

468, 481, 544, 545, 552, 554, 555,

556, 558

Mexico

financial crisis in, 181, 184–88

fiscal policy, 179

foreign exchange crisis in, 388–89, 393

Micro hedge, 596

Microsoft, 254, 305, 306, 559

MidAmerica Commodity Exchange, 597

Milken, Michael, 291, 293, 464, 551–52

Miller, Merton, 603

Minimum acceptable prices, 553

Ministry of Finance, Japan, 207

Mondex, 463

Monetary base, 215, 217

Monetary liabilities, of Federal 

Reserve, 215

Monetary policy, 214–50

asset-price bubbles and, 244–45

central banks and, 6–7, 191

defined, 6

economic growth and, 234

employment and, 233–34, 246

federal funds rate and, 218, 219–24

Federal Reserve banks and, 6, 191, 195

financial market stability and, 234

fiscal policy and, 211

FOMC and, 199

foreign-exchange market stability 

and, 235

goals of, 232–37

housing price bubble and, 174

inflation targeting and, 237–52, 246

interest-rate stability and, 234–35

policy instrument selection,

246–48, 250

price stability and, 232–33, 235–37

repurchase agreements (repos) and,

266–67

time-inconsistency problem, 233

Monetary Policy Report to the

Congress, 203

Monetary policy tools, 216–31

discount policy, 217, 221–22, 226–28,

250

European Central Bank, 230–31

federal funds rate and, 219–24

Federal Reserve, 216–30

lending to banks, 231

open market operations, 216–17,

220–21, 224–26, 231, 250

reserve requirements, 217–19, 222–24,

228–30, 231, 250

Money (money supply), 6. See also

money supply

Money center banks, 259, 409–10

Money market deposit accounts, 400, 574

Money Market Investor Funding Facility

(MMIFF), 230

Money market mutual funds (MMMF),

27t, 28t, 497f, 499

average distribution of assets, 501f

characteristics of, 499

checks, 30

defined, 30, 499

Federal Reserve and, 229–30

history of, 466

money markets and, 259t

net assets, 500f

regulation of, 499

shares, 30

Money market rates, 274, 275t

Money markets, 254–76

banks vs., 255–57

characteristics of, 255

cost advantages of, 256–57

defined, 20, 255–57

importance of, 254

need for, 255

opportunity costs and, 257

participants in, 258–60

purpose of, 257–58

sample interest rates, 257t

wholesale markets, 255

Money market securities, 254–76, 260–73

banker’s acceptance, 271

calculating present value of, 274–76

characteristics of, 255

commercial paper, 268–71

comparing, 273–76

defined, 276

Eurodollars, 271–73

federal funds, 264–66

interest rates, 273, 275t, 276

liquidity, 274

markets, 276t

negotiable certificates of deposit, 

267, 268f

repurchase agreements (repos),

266–67

secondary market for, 255

transactions, 255

Treasury bills, 261–64

“Money Rates,” Wall Street Journal, 274

Money supply

discount lending and, 217

foreign exchange interventions and,

374–77

monetary liabilities of Federal 

Reserve, 215

open market operations and, 217

reserves and, 215

Monitoring

credit risk management and, 

569–70, 571

information, 146–47

Monoline insurance companies, 531

Montgomery Securities, 545

Moody’s Investor Service, 92, 141, 157

bond ratings, 292t

Moral hazard

conflicts of interest, 26, 154–60

credit rationing and, 572–73

credit risk management and, 569,

572–73

in debt contracts, 145, 147–51, 151t

defined, 26, 139

in equity contracts, 145–48, 151t

financial crises and, 166

financial information and, 146–47

financial structure in debt markets

and, 148–51

government regulation and, 30–31

government safety net and, 428

in insurance, 516, 540

insurance fraud, 528

lender of last resort and, 228, 393

mortgage down payments and, 328

principal-agent problem, 145–48, 161

“too big to fail” policy and, 429–30

tools for dealing with, 146–51, 151t

Morgan Stanley, 156, 159, 456, 481, 538,

544, 556

Morningstar, 512

Mortgage-backed securities, 336–40

collateralized debt obligations, 339

defined, 336

financial crisis of 2007–2009 and, 171,

174, 175

real estate bubble and, 339–40

subprime loans, 338–39

types of, 337–38

Mortgage Bankers Association, 338

Index

I-15

---

Mortgage banks, 335–36

Mortgage bonds, 291

Mortgage brokers, 438

Mortgage interest rates, 325–27, 340

discount points and, 325–27

loan terms and, 325

long-term Treasure interest rates 

and, 326f

market rates, 325

Mortgage-lending institutions, 325, 333

types of, 333, 334t

on the Web, 334, 335

Mortgage markets, 323–40

agency problems in, 172–73

characteristics of, 323

defined, 323

financial crisis of 2007–2009 and,

172–73

financial innovation in, 172

government regulation of, 324–25

originate-and-distribute model, 325

principal-agent problem in, 325

secondary, 325, 335–36

Mortgage pass-through, 336

Mortgage pools and trusts, 336

mortgages held by, 333, 334f

value of mortgages held in, 337f

Mortgages

adjustable-rate, 330–31

amortization of, 329–30

amortized, 324

balloon loans, 324–25

borrower qualification, 328–29

calculators, 343

characteristics of, 325–30

collateral for, 327–28

conventional, 330

credit-worthiness and, 328–29, 339

defaults, 333

defined, 324, 340

down payments, 328, 332

fixed-rate, 330–31, 574

fully amortized, 329

graduated-payment, 331, 333t

growing-equity, 331, 333t

history of, 324–25

insured, 330

interest payments, 329–30

Internet sources of, 334, 335

loan servicing, 334

loan terms, 325, 327–29

option adjustable-rate, 332

property types, 324t

refinancing, 343

residential, 324, 325–30

reverse annuity, 332, 333t

second, 328, 331–32, 333t

securitization of, 336–40, 464

servicing, 334, 336

tax considerations, 332

types of, 324, 330–33, 333t, 340

uninsured, 336

variable-rate, 573–74

Municipal bonds, 286–88, 498

calculating interest rates, 286

default rates, 288

defined, 286

general obligation, 287

income tax considerations, 94, 96

interest rates, 94–96

revenue, 287

tax-free, 286

Mutual Benefit Life, 522

Mutual funds, 27t, 28t. See also money

market mutual funds

annual statements, 503

asset distribution among, 497f

benefits of, 490

board of directors, 494, 496, 509

bond funds, 498

closed-end, 494

complexes, 494

defined, 30, 489

efficient market hypothesis and, 120–21

equity funds, 497–98

ethics and, 507

fee structure, 501–2

4

PM

valuation rule, 508, 510

for 401(k) plans, 491, 493t

growth of, 489–91

hedge funds, 503–6

hybrid funds, 498

independent directors of, 503

index funds, 500–501

interest-rate risk of, 54

investment advisors and, 500–501, 503

investment in, 129

investment objective classes, 497–501

late trading, 508

market timing, 508

money market, 499, 500f

net asset value, 495–96, 508–10

open-end, 494

organizational structure, 494–96, 496f

origins of, 490

ownership of, 491, 493t

prospectus, 503

redemption fees, 508, 510

regulation of, 495, 502–3, 509–10

Securities and Exchange Commission

and, 495, 502–3, 509–10

shareholder reports, 503

shareholders, 494, 496, 507

total industry net assets, 492t

transaction costs and, 138–39

transparency, 510

Mutual funds industry, 489–510

abuses, 507–10

conflicts of interest in, 506–10

regulation and, 509–10

Mutual insurance companies, 517

Mutual savings banks, 27t, 28–29,

28t, 483

N

Named-peril policies, 524

NASDAQ (National Association of

Securities Dealers Automated

Quotation System), 19, 130, 133,

305, 307, 318, 555

National Banking Act of 1863, 324

National banks (federally chartered

banks), 456

National Bureau of Economic Research,

56–57

National Central Banks (NCBs), 204

National Credit Union Administration

(NCUA), 31t, 483

National Credit Union Share Insurance

Fund (NCUSIF), 32, 483

National Steel, 539

NationsBank, 478, 545

Nationwide banks, 478–79

Natural rate of unemployment, 234

Negative interest rates, 47, 81–82

Negotiable certificates of deposit (CDs),

267, 268f, 272, 273f, 276t

Net asset value (NAV), 495–96, 

508–10

Net income, banks, 419

Net interest margin (NIM), 420, 421t

Netscape, 559

Net worth

adverse selection and, 145

calculation of, 576n

debt contracts and, 149

duration gap analysis and, 576–77, 

582, 584