Financial Markets and Institutions (2-downloads)

also currency exchange

defined, 4–5, 344

developments in, 365–66

equilibrium in, 354, 354f

intervention in, 374–78

organization of, 348

stability in, 235

transactions in, 345

Foreign exchange rates, 344, 345f. See

also exchange rate regimes

changes in, 355–67

changes in expected future rates,

357–58

defined, 5, 346

determination of, 347, 348–54, 

358–60, 367

equilibrium, 360–61

fluctuations in, 5

forecasts, 366–67

foreign interest rates and, 355–57, 356f

importance of, 346

inflation and, 360–61

interest rates and, 355, 356f, 358,

360–61

law of one price, 348–49

long-term determinants of, 348–52

overvalued, 382

publication of, 347f

purchasing power parity theory,

349–50

short-term determinants of, 352–54

subprime mortgage loans and, 364–65

U.S. dollar and, 362–63

volatility of, 362

Foreign exchange risk, hedging, 601–2

Foreign financial markets, 20, 33

Foreign goods, 5, 346, 351

Foreign interest rates, 355, 356f, 357,

358, 359t

Foreign stock markets, 22, 23f

Foreign stocks, 318

Foreign trade, 483–84

Fortune, 293

Forward contracts

defined, 591

hedging foreign exchange risk with,

601–2

interest-rate, 591–93

pros and cons of, 592–93

Forward exchange rate, 346, 601n

Forward markets, 591–93

Forward rate, 110–12

Forward transactions, 346

401(k) plans, 491, 493t

France, 387

Franklin, Benjamin, 524

Fraud prevention, in insurance, 528

Fred Alger & Company, 507

Freddie Mac. See Federal Home Loan

Mortgage Corporation (FHLMC)

(Freddie Mac)

Free-rider problem, 141–42, 144, 147,

425, 435

Frictional unemployment, 233–34

Front-end loaded funds, 501–2

Full employment, 233–34

Full-service brokers, 554–55, 564

Fully amortized loans, 39, 329

Fully funded pension plans, 532

Fully subscribed issues, 549

Fundraising, by venture capital firms, 561

Futures contracts

defined, 459

hedging foreign exchange risk with,

601, 602

options contracts vs., 609

profits and losses on, 607–10

stock index, 603–5

Futures options, 606, 611–13

“Futures Prices,” Wall Street

Journal, 604

G

Gap analysis

basic, 575

duration, 576–84

examples, 575–76

income, 574–76

maturity bucket approach, 575–76

GE Capital, 269

Genentech, 559

General Accounting Office, 202

General Agreement on Tariffs and Trade

(GATT), 381

I-10

Index

---

Generalized dividend valuation model,

309–10

General Motors, 460, 538

General Motors Acceptance Corporation

(GMAC), 258, 258n, 269

General obligation bonds, 287

German mark, 386–87

German-style universal banking 

system, 481

Germany

cashless society in, 463

foreign exchange crisis, 386–87

inflation in, 386–87

sources of external funds for

businesses, 136

Gerstner, Louis, 563

Ginnie Mae, 336, 337

Glass-Steagall Act of 1933, 256, 437, 456,

479–80, 557

commercial banks and, 544

investment banks and, 544–45

repeal of, 480

Global Crossing, 157

Global Legal Settlement of 2002 and,

159–60

Globex electronic trading platform, 598t

GMAC (General Motors Acceptance

Corporation), 258, 258n, 269

Goal independence, 202

Goldman Sachs, 159, 260, 481, 544, 563

Good news, stock prices and, 128–29

Gordon, Myron, 310

Gordon growth model, 309–10, 320

Enron scandal and, 315

financial crisis of 2007–2009 and,

314–15

September 11 terrorist attacks

and, 315

Go-round, 199

Government bonds, 498

Government deficits, 76t, 77

Government National Mortgage

Association (GNMA) (Ginnie

Mae), 336, 337

Government retirement funds, 27t,

28t, 29

Government safety nets, 425–30

adverse selection and, 428

deposit insurance, 426–27

financial consolidation, 429–30

lender of last resort, 427

moral hazard and, 428

“too big too fail” policy, 428–29

Government securities

as bank assets, 402

Federal Reserve assets, 216

liquidity of, 402

Government-sponsored enterprises

(GSEs)

bonds issued by, 284

financial crisis of 2007–2009 and, 230

future regulations, 450

Government-Sponsored Entities

Purchase Program, 230

Graduated-payment mortgages (GPMs),

331, 333t

Gramm-Leach-Bliley Financial Services

Modernization Act of 1999, 429,

439, 442t, 480, 557

Grant and Ward, 167

Graphing data, 9

Great Britain, 463

Great Depression, 162, 188, 211, 319, 537

causes of, 169–70

debt deflation and, 168

Glass-Steagall Act and, 544

mortgage market and, 324

regulatory response to, 456

risk premium on corporate bonds

during, 92

unemployment during, 234

Great Fire of London, 524

Greenberg, Jeffrey, 526

Greenberg, Maurice, 530

“Green book,” 199, 200

Greenspan, Alan, 163, 197n, 200, 201–2,

203, 209, 244, 536

Growing-equity mortgages (GEMs), 

331, 333t

Growth estimates, 309–10, 313

Guaranteed securities, 414

Gutfreund, John, 264

H

Haircuts, 174, 175

Hamanaka, Yasuo, 416

Hamilton, Alexander, 455

Haugen, Robert, 313

Health care costs, 522–23

Health insurance, 516, 522–24, 523

Health maintenance organizations

(HMOs), 523

“Heard on the Street,” Wall Street