Financial Markets

Financial Intermediaries

Financial Intermediation: channeling funds from a surplus unit to a deficit unit
 
  • Depository units (e.g. banks): make loans out of deposits
  • Contractural savings intermediaries (e.g. insurance, pension funds): periodic funds on contractual basis invested in long-term securities 
  • Investment intermediaries (e.g. finance companies, mutual funds): selling commercial papers, shares, bonds etc. to raise funds 

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