Financial Markets and Institutions, 11 edition

Book Preface

Financial markets finance much of the expenditures by corporations, governments, and individuals. Financial institutions are the key intermediaries in financial markets because they transfer funds from savers to the individuals, firms, or government agencies that need funds. Financial Markets and Institutions, 11th Edition, describes financial markets and the financial institutions that serve those markets. It provides a conceptual framework that can be used to understand why markets exist. Each type of financial market is described with a focus on the securities that are traded and the participation by financial institutions.

Today, many financial institutions offer all types of financial services, such as banking, securities services, mutual fund services, and insurance services. Each type of financial service is unique, however. Therefore, the discussion of financial services in this book is organized by type of financial service that can be offered by financial institutions.

Since the credit crisis, regulatory actions have been taken to prevent another crisis in the future. Accordingly, this text gives special attention to the impact of financial reform on each type of financial market and financial institution.

INTENDED MARKET

This text is suitable for undergraduate and master’s level courses in financial markets, or financial institutions. To maximize students’ comprehension, some of the more difficult questions and problems should be assigned in addition to the special applications at the end of each chapter and the Comprehensive Project. A term paper on the credit crisis may also be a valuable exercise, and several possible topics for this paper are provided at the end of the first chapter.

ORGANIZATION OF THE TEXT

Part 1 (Chapters 1 through 3) introduces the key financial markets and financial institutions, explains why interest rates change over time, and explains why yields vary among securities. Part 2 (Chapters 4 and 5) describes the functions of the Federal Reserve System (the Fed) and explains how its monetary policy influences interest rates and other economic conditions. Part 3 (Chapters 6 through 9) covers the major debt security markets, Part 4 (Chapters 10 through 12) describes equity securities markets, and Part 5 (Chapters 13 through 16) covers the derivative security markets. Each chapter in Parts 3 through 5 focuses on a particular market. The integration of each market with other markets is stressed throughout these chapters. Part 6 (Chapters 17 through 20) concentrates on commercial banking, and Part 7 (Chapters 21 through 25) covers all other types of financial services provided by financial institutions. Courses that emphasize financial markets should focus on the first five parts (Chapters 1 through 16); however, some chapters in the section on commercial banking are also relevant. Courses that emphasize financial institutions and financial services should focus on Parts 1, 2, 6, and 7, although some background on securities markets (Parts 3, 4, and 5) may be helpful.