Financial Markets and Institutions (2-downloads)

I-6

Index

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E

Early-stage investing, 562

East Asia

financial crises in, 184–88, 391, 393

fiscal policy, 178–79

foreign exchange crisis in, 388–89

E-cash, 462

Eccles, Marriner S., 200

Econometric models, 84

Economic growth

inflation targeting and, 241–42

interest rates and, 2

monetary policy and, 234

price stability and, 235

Economic Stabilization Act of 2008, 220

Economies of scale

bank consolidation and, 476

defined, 24

transaction costs and, 138–39

Economies of scope

bank consolidation and, 476–77

conflicts of interest and, 155, 156

Ecuador, 181

Edge Act corporations, 485

Effective exchange rate index, 362, 363f

Effective rate, 265

Efficient market hypothesis

behavioral finance and, 131

calculations, 117–19

defined, 117, 132

evidence on, 120–26, 132

excessive volatility and, 125–26

expectations and, 116

foreign markets and, 124

January effect and, 125

market overreaction and, 125

mean reversion and, 126

new information and, 126

operation of, 117–19

prices and, 117–20

rationale for, 119–20

small-firm effect and, 124–25

stock market crashes and, 130

stock market investing and, 127–29

stronger version of, 120

unexploited profit opportunities and,

119–20

E-finance, 7

Egg, 461

Eisner, Michael, 563

Electronic banking, 439, 477

Electronic communication networks

(ECNs), 304, 306–7, 320

Electronic money (e-money), 462–63

Electronic payment systems, 461, 462

Electronic Signatures in Global and

National Commerce Act of 

2000, 439

Emergency Economic Stabilization Act,

178, 437

Emerging market economies. See also

developing countries;

international financial systems

balance sheet deterioration in, 182

currency crises in, 181–82

defined, 178

deposit insurance in, 427

financial crises in, 178–88

financial futures markets, 597

financial globalization and, 178–80

fiscal imbalances in, 180–81, 182

Employee Retirement Income Security

Act (ERISA), 537–39

Employment

monetary policy and, 233–34, 246

price stability and, 236

Encumbrances, 328

Enron Corp., 142, 143, 146, 157, 315

Entrepreneurs, 17

Entry restrictions, 32

Equal Credit Opportunity Act of

1974, 436

Equilibrium, in foreign exchange

markets, 354, 354t

Equilibrium exchange rates, 360–61

Equilibrium (market-clearing) interest

rates, 246

changes in, 72–77

defined, 71

demand curve for bonds and, 72–75

federal funds rate and, 223

for reserves, 219

supply curve for bonds and, 75–77

Equilibrium (market-clearing) price, 71

Equipment trust certificates, 291–92

Equities, 18

Equity capital, 145, 411–12. See also

net worth

Equity contracts, 145–48

Equity funds, 497–98, 497f

Equity holders, 18

Equity markets, 18

Equity multiplier (EM), 411–12

Equity sales, 550–51

Estonia, 385

Ethics, mutual funds and, 507

Euro, 5, 346, 347t, 383

Eurobonds, 20–21, 414

Eurocurrencies, 21, 484n

Eurodollars, 271–73

certificates of deposit, 272, 276t

contracts, 597

defined, 21

market, 272, 484–85

Euronext N.V., 304

Euronotes, 414

Europe, financial crisis and, 176

European Central Bank (ECB), 176,

203–5, 229, 383

Bank of England and, 206

Executive Board, 204

Governing Council, 204–5

independence of, 205, 207

monetary policy strategy, 240

monetary policy tools, 230–31, 250

National Central Banks, 204

price stability and, 235–36

European Data Protection Directive, 439

European Monetary System (EMS), 21,

381, 383, 385, 387, 389

European Monetary Union, 203–5

European options, 606

European System of Central Banks

(ESCB), 203–5, 204, 212

European Union (EU), 381, 383

Eurosystem, 204

Examination, 433–34

Ex ante real interest rate, 48

Excess demand, 71

Excess reserves, 215–16

bank management of, 406–8

bank operations and, 401, 404–5

demand curve, 218

Excess supply, 71

Exchange fees, 502

Exchange rate mechanism (ERM), 

381, 387

Exchange rate regimes, 380–91. See also

foreign exchange rates

fixed, 380, 381–85, 392

floating, 380

managed float (dirty float), 380, 381,

390–91

Exchange rates, 344, 345f. See also

foreign exchange rates

Exchanges, 19

Exchange traded funds (ETFs), 307

Exclusive insurance agents, 517

Executive Life, 522

Exercise price (strike price), 606

Exiting an investment, 562

Expectations, efficient market hypothesis

and, 116, 117

Expectations theory

calculations, 99–102

defined, 98

liquidity premium and, 104

term structure of interest rates and,

97–102, 112–13

Expected inflation

bond demand curve and, 73t, 75

bond supply curve and, 76–77

Fisher effect and, 78–79

interest rates and, 78–79

Expected interest rates, 74

Expected returns

asset demand and, 64, 65–66

bond demand curve and, 73t, 74–75

on bonds, 69

calculating, 65

Index

I-7

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defined, 64

on domestic and foreign goods, 370–73

Expertise, transaction costs and, 139

Export demand, 352t, 360

External funds, 135–37, 136f

F

Face amount, 296t

Face value (par value), 39

Fair Credit Billing Act of 1974, 436

Fair Isaac Company, 329

Fair-value accounting, 436

Fallen angels, 463

Fama, Eugene, 124

Fannie Mae, 177, 230, 336, 450

Farmers Home Administration, 284

Federal Advisory Committee, 193f

Federal agencies

mortgages held by, 334f

regulatory, 31t, 456–57

Federal Deposit Insurance Corporation

(FDIC), 31t, 32

bank failure and, 426–26

Bank Insurance Fund, 444–45

corrective action procedures, 431

deposit insurance, 456, 457

Deposit Insurance Fund, 32

lender of last resort and, 227

mutual savings banks and, 483

savings and loans and, 444, 482

“too big to fail” policy and, 428–29

Federal Deposit Insurance Corporation

Improvement Act (FDICIA) of

1991, 442t, 444–45

Federal Deposit Insurance Reform Act of

2005, 442t, 445

Federal funds (fed funds), 264–66

bank borrowings of, 401

interest rates, 266f, 273f

markets, 276t

purpose of, 264

rate-sensitive, 574

terms for, 265

Federal funds rate, 252

defined, 217–18, 274

discount lending and, 219, 221–22

discount rate and, 222

effective, 265

Federal Reserve operating procedures

and, 223

monetary policy and, 219–24, 246, 247f

open market operations and, 219–21

required reserves and, 222, 223f

reserve requirements and, 219, 222

reserves market and, 218–19

Federal Home Loan Bank System

(FHLBS), 482

Federal Home Loan Mortgage

Corporation (FHLMC) (Freddie

Mac), 177, 230, 284, 336

future regulation of, 450

interest rates, 274

pass-through securities, 338

rates, 274

subprime mortgage crisis and, 284–86

Federal Housing Administration (FHA),

284, 330, 333, 335

Federal Housing Finance Agency, 285

Federalists, 455

Federal Land Banks, 284

Federal National Mortgage Association

(FNMA) (Fannie Mae),

284–86, 335

Federal Old Age and Disability Insurance

Program, 534. See also Social

Security

Federal Open Market Committee

(FOMC), 193, 195, 198–200, 224,

252, 376

chairman and, 201–2

communication strategy, 209

FOMC meeting, 199–200

inflation targeting and, 242

membership, 198–99

research documents, 200

Federal Railroad Retirement Act of 

1934, 536

Federal Reserve Act, 193, 210n, 229, 441t

Federal Reserve Bank of Chicago, 194

Federal Reserve Bank of New York, 194,

195, 198, 199, 505

bond market and, 195

financial crisis of 2007–2009 and, 230

foreign exchange desk, 195, 375, 376

open market desk, 195, 224–26

Federal Reserve Bank of San 

Francisco, 194

Federal Reserve banks, 193, 194–96

branches, 194

functions of, 194–95

monetary policy and, 195

open market operations and, 195, 196