Week 3 Objectives: Role & Impact of Non-Bank Financial Institutions in Financial Economics, Study notes of Capital Markets Regulation

Download Week 3 Objectives: Role & Impact of Non-Bank Financial Institutions in Financial Economics and more Study notes Capital Markets Regulation in PDF only on Docsity! 524 Week 3 Objectives FBE 524 Class Objectives and Assignments J. K. Dietrich Week 3– September 14, 2005 Goals and Objectives (1) Name, classify by type, and define services provided by non-bank intermediaries, and rank in terms of total financial assets in the U.S. economy and the role they play in the allocation of savings to investment; (2) Describe the economic benefits provided by the financial services provided by each non-bank financial institution and relate to consumer or business needs and illustrate their connection to basic characteristics of the financial statements (balance sheets and income statements) of each type of firm; (3) Describe and provide examples of rapid growth, declining share, and major changes in broad classes of financial institutions in the last three decades and relate to broad macro-economic and demographic changes; (4) Relate major investments of non-bank financial institutions to characteristics of their customers and the financial services they provide. Important Vocabulary List from Class INSURANCE-TYPE FINANCIAL INSTITUTIONS LIFE INSURANCE AND ANNUITIES PROPERTY AND CASUALTY INSURANCE COMPANIES PRIVATE VERSUS STATE AND LOCAL GOVERNMENT PENSION PLANS DEFINED CONTRIBUTION VERSUS DEFINED BENEFIT RETIREMENT PLANS MANAGED ASSETS, ASSET MANAGERS, INVESTMENT COMPANIES OPEN-ENDED VERSUS CLOSED-END MUTUAL FUNDS, EXCHANGE-TRADED FUNDS, REAL ESTATE INVESTMENT TRUSTS ASSET POOLS OR ASSET-BACKED SECURITIES SECURITIES FIRMS, INVESTMENT BANKS, MORTGAGE BANKERS, SECURITIES ISSUERS GOVERNMENT-SPONSORED AGENCIES Suggested Wall Street Journal or other Articles Monday, August 29, 2005 “Katrina Rages Towards New Orleans” (A3) – Following catastrophe stories like this in the Wall Street Journal can teach you a lot about casualty insurance, as we discuss this week “Bank of Italy Defends Its Deal Oversight” (C3) – Regulator’s interference in cross-border merger of financial institutions provokes global controversy Tuesday, August 30, 2005 “Hurricane Cuts Destructive Path Along Gulf Coast” (A1) and “Insured Losses Could Reach Up to $26 Billion” (A2) – Together the stories provide good discussions of catastrophe losses to casualty insurance companies “Katrina Can’t Budge Bond Markets” (C5) – Effects of a major catastrophe on the key focus of our course in the next few weeks, the level of interest rates 524 Week 3 Objectives Wednesday, August 31, 2005 “Storm Leaves Gulf Coast Devastated” (three stories A1) – Close reading of this story illustrates the general-equilibrium impact of a major exogenous shock and could alert an astute observer to potential risks and opportunities presented by a major shift in circumstances as effects ripple out from the impact “Yields on Treasurys Go Nearly ‘Flat’; Dow Declines 50.23” (C1) and “Yield-Curve Inversion Chances Rise” (C4) – Stories illustrate importance of the Treasury yield curve and changes in it that we discuss in Week 6 Thursday, September 1, 2005 “Will Katrina Cause the Fed to Pause?” (A2) – News coverage of Federal Open-Market Committee Meeting” illustrates the attention market pays to these decisions that we discuss extensively in Week 12 “Yield Curve Could Give Fed Pause” (C4) – More discussion of the Treasury yield curve and the FOMC meeting, both topics discussed later in the semester (see above) Friday, September 2, 2005 “Negative Saving: In July, Spending Outpaced Earning” (A2) – Discusses reported savings and problems with standard U.S. measures of personal saving (it ignores wealth changes in housing and equities) “Taking a Fresh Look at Bond Funds” (C1) – Investment implications of expectations of interest rates focuses on fixed incomes, a major focus of our course Monday, September 5, 2005 “Slices of Risk: How a Formula Ignited Market That Burned Some Big Investors” (A1) – A great article on analysis and measurement of credit risk, an important topic of this course and providing a real insight into how research interacts with financial market product development and pricing “Japanese Voters Give Koizumi Broad Mandate” (A1) – Election provoked by resistance to privatization of Japanese postal savings bank, a $3 trillion institution greatly distorting flow of savings into investment in Japan “Claims to Property Insurers Could Be as Much as $60 Billion” (A6) – impact of Katrina on property and casualty insurers illustrates risk of insurance business Tuesday, September 6, 2005 “CEO Says Allstate Adjusts Storm Plan” (C1) – Coverage of major property insurer to Katrina illustrates management challenges in insurance industry “Citigroup Dealt Blow on Asset Swap” (C15) – Shareholders in mutual funds exert seldom observed powers during asset-management firm acquisition “Yale Manager Blasts Industry” (R1) – Highly regarded manager of Yale’s endowment criticizes mutual- fund industry