출처: Lecture Notes on MONEY, BANKING, AND FINANCIAL MARKETS
By Peter N. Ireland, Department of Economics, Boston College
2 Structure of Financial Markets
2.1 Debt and Equity Markets
(1) Debt instrument = a contractual agreement by the issuer of the instrument (the borrower) to pay the holder of the instrument (the lender) fixed dollar amounts (interest and principal payments) at regular intervals until a specified date (maturity date) when a final payment is made.
- Examples: Government and corporate bonds.
- Maturity = number of years or months until the expiration date.
- Short-term = maturity of less than one year.
- Long-term = maturity of more than ten years.
- Intermediate-term = maturity between one and ten years
(2) Equity = a contractual agreement representing claims to a share in the income and assets of a business.
- Example: Corporate stock.
- May pay regular dividends.
- Have no maturity date; hence are considered long-term securities.
- Since equity holders own the firm, they are entitled to elect members of the firm’s board of directors and vote on major issues concerning how the firm is managed.
A key feature distinguishing equity from debt is that the equity holders are the residual claimants: the firm must make payments to its debt holders before making payments to its equity holders.
2.2 Primary and Secondary Markets
(1) Primary market = market in which newly-issued securities are sold to initial buyers by the corporation or government borrowing the funds.
- Example: US Treasury issues a new US Government bond, and sells it to JP Morgan .
- Investment banks play an important role in many primary market transactions by underwriting securities: they guarantee a price for a corporation’s securities and then sell those securities to the public.
(2) Secondary market = market in which previously-issued securities are traded.
- Example: JP Morgan sells the existing US government bond to Merrill Lynch.
- Brokers and dealers play an important role in secondary markets:
(a) Brokers = facilitate secondary-market transactions by matching buyers with sellers.
(b) Dealers = facilitate secondary-market transactions by standing ready to buy and sell securities.
Note that the originally issuer or borrower receives funds only when its securities are first sold in the primary market; the issuer does not receive funds when its securities are traded in the secondary market. Nevertheless, secondary markets perform two essential functions: They allow the original buyers of securities to sell them before the maturity date, if necessary. That is, they make the securities more liquid. They allow participants in the primary markets to make judgements about the value of newly-issued securities by looking at the prices of similar, existing securities that are traded in the secondary markets.
2.3 Exchanges and Over-the-Counter Markets
(1) Exchange = buyers and sellers meet in a central location. (Example: New York Stock Exchange.)
(2) Over-the-Counter (OTC) Market = dealers at di?erent locations trade via computer and telephone networks. Examples: NASDAQ (National Association of Securities Dealers’ Automated Quotation System); US Government bond market.
2.4 Money and Capital Markets
(1) Money market = only short-term debt instruments are traded.
(2) Capital market = intermediate-term debt, long-term debt, and equities traded.
3. Financial Instruments
3.1 Money Market Instruments
The principal money market instruments are:
- US Treasury Bills
- Negotiable Bank Certificates of Deposit
- Commercial Paper
- Banker’s Acceptances
- Repurchase Agreements
- Federal Funds
All of these money market instruments are, by definition, short-term debt instruments, with maturities less than one year.
3.2 Capital Market Instruments
The principal capital market instruments are:
- Corporate Stocks
- Residential, Commercial, and Farm Mortgages
- Corporate Bonds
- US Government Securities (Intermediate and Long-Term)
- State and Local Government (Municipal) Bonds
- US Government Agency Bonds
- Bank Commercial and Consumer Loans