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New Finance, The (Haugen), 313
New York, regulation in, 525–26
New York Futures Exchange, 597
New York Mercantile Exchange, 623
New York Stock Exchange (NYSE), 19,
304, 305, 555, 556
Direct+ order routing system, 306–7
program trading and, 603
New Zealand, 237–38, 239, 241
Nikkei 225 contracts, 597
Nikkei 300 Average, 22
Nikkei stock exchange, 304, 416
NINJA loans, 329, 339, 438
Nippon Ginko (Bank of Japan), 207
No Doc loans, 329, 339, 438
No-load funds, 502
Nominal anchors, 232, 250
Nominal interest rates, 48–50, 49n. See
also interest rates
fluctuations in, 64
foreign exchange rates and, 363, 364f
yield curves and, 108
I-16
Index
Nonbank corporations, 269
Nonbank financial institutions, 581–82
Nonbank loans, 135, 136f
Nonborrowed reserves (NBR), 218–19,
221, 246, 247f
Noncompetitive bidding, 263
Noninterest expenses, for banks, 417
Noninterest income, for banks, 417
Nontransaction deposits, 400–401
Northern Rock, 176
Notional principal, 613
NOW accounts, 404, 405
NYSE Euronext, 304
O
Obama, Barack, 96
Off-balance-sheet activities, 414–15
defined, 414, 431
fee income from, 414, 417
loan sales, 414
regulation and, 431
risk management techniques, 415
trading activities, 415
Office of Federal Housing Enterprise
Oversight (OFHEO), 285
Office of the Comptroller of the
Currency, 31t, 32, 196, 434,
456–57, 480
Office of Thrift Supervision (OTS),
31t, 482
Official reserve transactions
balance, 379
Offshore deposits, 484
Ohio Life Insurance and Trust
Company, 167
One-period valuation model, 308
Online banking, 461–62
Online-only banks, 461
Open-end mutual funds, 494
Open interest, 597
Open market operations, 216–17
defensive, 224
dynamic, 224
European Central Bank, 231
Federal Reserve banks and, 195, 196,
216–17
monetary policy and, 220–21, 224–26
open market desk, 224–26
Open-peril policies, 524
Operating expenses, for banks, 417, 419
Operating income, for banks, 417, 419
Operating instruments, 246
Opportunity costs, 257
Option adjustable-rate mortgages (option
ARMs), 332
Options, 606–13
contracts, 606–7
defined, 606, 619–20
futures contracts vs., 609
owners or buyers of, 606
premiums, 606, 607, 609, 610–11
profits and losses on, 607–10
sellers or writers of, 606
strike price, 610, 611
term to expiration, 611
types of, 606–7
Organized exchanges, 280–81, 320
Organized securities exchanges, 304–7
listing stocks on, 304
over-the-counter markets vs., 305–6
regional, 305
Originate-to-distribute business
model, 171
Osaka Securities Exchange, 597
Overconfidence, 131
Overdraft privileges, 414
Overfunded pension plans, 532
Overnight cash rate, 230
Overregulation, 450
Oversubscribed issues, 549
Over-the-counter (OTC) markets, 19,
280, 305–6, 320
Overvalued exchange rates, 382
P
Panic of 1907, 192
Paper loss, 53
Parmalat, 142
Participation certificates (PCs), 338
Par value, 39, 296t
Pass-through securities
FHLMC, 338
GNMA, 337
mortgage, 336
private, 338
types of, 337–38
Patient Protection and Affordable Care
Act, 523–24
Payable on demand accounts, 400
Payoff method, for failed banks, 426
Pecking order hypothesis, 144
Pension Benefit Guarantee Corporation
(PBGC) (Penny Benny), 538–39,
539f, 540
Pension fund managers, 534
Pension funds, 27t, 28t
defined, 29
money markets and, 259t, 260
prudent man rule and, 560
Pension plans
defined, 531
defined-benefit, 532, 538
defined-contribution, 532–33
as financial intermediaries, 513
fully funded, 532
future of, 540
growth of, 531–32
insurance on, 538
private, 533–34
public, 534–37
regulation of, 537–40
Social Security, 534–37
types of, 532–37, 540
underfunded, 532
vesting requirements, 538
Perfect substitutes, 99
Performance measures, banks, 417–20
income statements, 417–19
net income, 419
net interest margin, 420, 421t
return on assets, 419, 420, 421t
return on equity, 419, 420, 421t
trends in, 420, 421t
Perpetuities (consols), 44–46, 294
Peso/dollar exchange, 384
Philippines, 389
Piggyback mortgages, 331, 339
Piper, 525
Plain vanilla swaps, 613
Points, for residential mortgages,
325–27
Policy Targets Agreement, 237–38
Political business cycle, 210
Portfolio balance effect, 378n
Portfolio insurance, 603
Portfolios, 25, 28, 59–60
Positive feedback loop, 131
Preferred stockholders, 303–4
Preferred stocks, 303–4
Premium, bonds selling at, 298
Premiums, for options, 606, 607, 609,
610–11
Premiums, in insurance
liability insurance, 525
life insurance, 514, 520t, 521
risk-based, 527–28
Prepayment risk, 336
Present value (present discounted
value), 37–39
Price/earnings ratio (PE), 311, 320
Price earnings valuation model, 311
Prices. See also bond prices; housing
prices; stock prices
efficient market hypothesis and,
117–20
equilibrium (market-clearing), 71
foreign exchange rates and, 351, 352 t,
358, 359t
Price stability
economic growth and, 235
employment and, 236
as goal of monetary policy, 232–33,
235–37
nominal anchor, 232
time-inconsistency problem, 232–33
Primary credit, 226–27
Primary credit facility, 226–27
Primary Dealer Credit Facility
(PDCF), 229
Primary dealers, 225
Index
I-17
Primary markets, 18–19, 543
Prime rate, 269f, 274
Principal (funds), 37
Principal-agent problems, 145–48
bank management and, 415, 416
financial crisis of 2007–2009 and,
171, 438
moral hazard and, 146
in mortgage markets, 325
tools for resolving, 146–48
Principals (stockholders), 145–46
Privacy, electronic banking and, 439
Private equity buyouts, 562–64
Private equity investment, 558–62
Private mortgage insurance (PMI), 328
Private pass-throughs (PIPs), 338
Private pension plans, 513, 533–34, 533f.
See also pension funds
Private placements, 549–50
Probability distributions, 519–20
Productivity, foreign exchange rates and,
351–52, 352t, 359t, 360
Profits before taxes, banks, 419
Program trading, 603
Property and casualty insurance,
524–25, 540
history of, 524
purpose of, 518
reinsurance, 525
terrorism and, 525
Property and casualty insurance
companies, 260, 524
Property insurance, 524
Property rights, 152, 153
Property titles, mortgage liens and, 328
Proprietary trading, 449
Prospectus, 546
Prudential Insurance, 517
Prudential supervision, 433
Prudent man rule, 560
Public Accounting Return and Investor
Protection Act (Sarbanes-Oxley
Act). See Sarbanes-Oxley Act
of 2002
Public Company Accounting Oversight
Board (PCAOB), 159, 436
Public interest view of bureaucracies, 207
Public pension plans, 534–37
Purchase and assumption method,
426–27, 429
Purchasing power parity (PPP) theory,
349–50
Putnam Investments, 507
Put options, 606–11
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